Presentation is loading. Please wait.

Presentation is loading. Please wait.

University of Houston Bauer College of Business January 27, 2005 presentation by: Robert B. Hixon T HE W ORTHAM G ROUP Insurance & Risk Management.

Similar presentations

Presentation on theme: "University of Houston Bauer College of Business January 27, 2005 presentation by: Robert B. Hixon T HE W ORTHAM G ROUP Insurance & Risk Management."— Presentation transcript:

1 University of Houston Bauer College of Business January 27, 2005 presentation by: Robert B. Hixon T HE W ORTHAM G ROUP Insurance & Risk Management

2 T HE W ORTHAM G ROUP Take-Away Concepts Agent vs. Broker – Is there a difference? Salesmen or Professional Service provider? Where does your allegiance reside? Contractual Issues with the Insured and the Insurer Compensation Issues Commission Fee PSAs, MSAs and the new Underwriter Service Fee

3 Response to Request for Proposal T HE W ORTHAM G ROUP Insurance & Risk Management Sample Broker Presentation

4 T HE W ORTHAM G ROUP Discussion Items The Wortham Difference Insurance Market Update Available Services Team Selection & Support Casualty and Energy Claim Handling Services International Capabilities Cost of Risk and Retention Analysis Energy, Liability and Casualty Insurance Renewal Strategies Employment Practices Liability Alternative Programs Broker Relationship & Compensation Closing Comments

5 The Wortham Difference

6 T HE W ORTHAM G ROUP The Wortham Difference Largest independent insurance broker in Texas Our clients include many of Texas largest public companies and entities Largest market-share of any one broker in a major U.S. city Founded in 1915, current 425 employees Stable and experienced team Over $1 billion in client premiums annually

7 T HE W ORTHAM G ROUP The Wortham Structure A partnership owned by 69 individual partners with average tenure with the Firm of 20 years Approximately half of our partners are technical staff Highly departmentalized with specialization by coverage Dedicated to independence in finding the best solutions for our clients Excellent reputation with carriers worldwide High quality service with low overhead

8 T HE W ORTHAM G ROUP Mission Statement Service – to handle our clients insurance business as if it was ours Quality Coverages – to develop coverages and risk management tools that allow clients to better compete in their business Price – to forge relationships between carriers and our clients that will add value and be long term

9 T HE W ORTHAM G ROUP Representative Clients

10 T HE W ORTHAM G ROUP Adams Resource & Energy, Inc. American National Power Anadarko Petroleum Anderson Oil, Ltd. Apache Corporation City of Austin (Austin Energy) Bridas Energy Brownsville Public Utility Board BT Operating Company Chevron Phillips Chemical Co. LLC CICO Oil & Gas Cogen America ConocoPhillips Company Copano Operations, Inc. Delta Power Company, LLC Dorchester Hugoton Dynegy Inc. Edge Petroleum Corporation Global Octanes HNG Storage Key Energy Services, Inc. Lewis Energy LCRA Mosbacher Energy Company Nabors Industries, Inc. National Fuel Gas / Seneca Resources Ocean Energy, Inc. Parker Drilling Company Pioneer Drilling Company Plains Resources Peoples Energy Production Quicksilver Resources Range Resources Seitel, Inc. / DDD Energy, Inc. Spinnaker Exploration Company Tetra Technologies Texas Petrochemical The George R. Brown Partnership Verus Energy Representative Energy Clients

11 T HE W ORTHAM G ROUP Representative Marine Clients 32 supply boats 5 tankers 28 harbor tugs 1 derrick barge 9 vessels 10 vessels 2 seismic vessels 1 derrick barge

12 T HE W ORTHAM G ROUP Non-Energy Profile Clients

13 Insurance Market Update

14 T HE W ORTHAM G ROUP Standard & Poors Ratings Comparisons Source: Standard & Poors Notes: (1) Munich has now been downgraded to A+ (2) CNA s senior debt was recently down graded by Fitch to BBB-

15 T HE W ORTHAM G ROUP Lloyds of London Pure Year Profit/Loss, 1985-2002 (£m) 2000-2002 Annual & 3 Year Accounted Results

16 T HE W ORTHAM G ROUP Capacity Utilization (£bn) * Estimates from Business Plans

17 T HE W ORTHAM G ROUP Source:Lloyds Syndicate Quarterly Returns For First Quarter 2003 Risk Code: ET Energy, Search and Production Vessels and Offshore Property, including War (excluding War Only Risks) Quarter 19 98 Year of Account Loss Ratio % 20 00 19 99 20 01 20 02 20 03

18 T HE W ORTHAM G ROUP Risk Code: EW Energy Operators Extra Expenses and Well Control Quarter 19 98 Year of Account Loss Ratio % 19 99 20 00 20 01 20 02 20 03 Source:Lloyds Syndicate Quarterly Returns For First Quarter 2003

19 T HE W ORTHAM G ROUP Premium Rating Index

20 T HE W ORTHAM G ROUP Insurance Market -2003 Additional capacity entered the market following 2001 losses to take advantage of favorable underwriting conditions Lloyds capacity at all time record high of £14.4 billion Significant new capacity in Bermuda Attractive programs are oversubscribed Still have potential for 2003 catastrophes


22 Available Services

23 T HE W ORTHAM G ROUP Service Differentiation Risk Management Support Partner in risk management problem solving Provide presence when required Administrative consultation Underwriter meetings TPA/claims support meetings Trigger technical support Submitting frequent open items lists Advise as insurance market conditions change

24 T HE W ORTHAM G ROUP Critical Wortham Services Risk Management Information Systems (RMIS) support Internet portal Electronic certificates Contract review Retention analysis Exposure survey Loss control / safety support Alternative risk products

25 T HE W ORTHAM G ROUP Wortham Services Risk Management Information System Support Wortham can offer assistance in the design and/or maintenance of a Risk Management Information System which will: Record past/future loss data Track historical exposure data Provide accurate data on a timely basis Create needed reports for all management levels and disciplines Forecast cost of risk as a percent of revenue Support actuarial studies Perform administrative functions such as issue Certificates of Insurance

26 T HE W ORTHAM G ROUP Internet Portal Web portals are becoming a popular means of sharing information from many different sources into one convenient place: Publish on-line manuals Reference materials Include forms, video clips, sound and links Review/request certificates at anytime Review/request invoices at anytime Share files of any kind Collaborate on claims and safety issues

27 T HE W ORTHAM G ROUP The Value of Wortham RMIS to Corporations Risk Management Enhance quality of information and archiving Provides additional insight into loss trends; becoming tool for reduction of retained losses Leverages further your insurance negotiations to your advantage Creates flexibility for consideration of budgeting and allocation alternatives Many additional applications Significant support incorporated into basic brokerage model

28 T HE W ORTHAM G ROUP On-line Certificates of Insurance Web-based Certificate of Insurance coordination system 24 hours a day, 7 days a week Issue certificates directly from desk computers Look up prior certificates issued Certificate issuance service is subject to insurance carrier approval.

29 Contract & Certificate Review Support DrillingEngineering Project Management Wortham Contract Review Coordinator Casualty Technician Risk Management Support Property Technician CLIENT

30 Team Selection & Support

31 T HE W ORTHAM G ROUP Goals in Team Selection Experience in industry, very significant accounts and specialization requirements Availability to deliver Worthams standard of service Depth to provide appropriate and timely solutions to Noble Corporations risk management needs

32 T HE W ORTHAM G ROUP Service Team Primary account service team members chosen to meet Your needs Access to Worthams 425+ member team of experts Continuity – the average tenure of our partners and professionals is over 20 years

33 T HE W ORTHAM G ROUP Your Wortham Team Partner Account Executive Partner Risk Mgmt. Services Partner RMIS Loss Control Partner Alternative Risk Partner Prof. Indemnity Partner Crime/Bond Manager Partner Marine Partner Marine Partner Casualty International Casualty Partner Casualty Claims Partner Energy Partner Energy Joyce Gilbert Assistant

34 Casualty and Energy Claim Handling Services

35 T HE W ORTHAM G ROUP Casualty Claims Commitment Directed by Wortham Claims Manager 10-person Casualty Claims Department with over 130 years of combined claim experience Resources from across the country as needed Worthams continued assurance of quality control

36 T HE W ORTHAM G ROUP Casualty Claim Services Assistance in selecting claim service providers Monitoring of insurance company or independent claims services Review of claims prior to statistical filings Monitoring of questionable claims and active involvement in large claim settlements Resolution of coverage questions/disputes Assistance in locating qualified defense counsel Claim/reserve audits as needed Periodic status reports with action recommendations Self-insured program design and implementation Structured settlement and portfolio transfer consulting services, as requested

37 T HE W ORTHAM G ROUP Worthams Energy and Property Departments have successfully collected over $250,000,000 in claims, which have resulted from upstream oil and gas operations during the past five years. Our technicians handle all physical damage and control of well claims personally. Wortham believes that the clients interest is best served when the individual that negotiated the terms of coverage pays an integral role in the collection of a claim. We believe this approach provides a better service to the client. Energy, Well Control and Property Claims

38 International Capabilities

39 T HE W ORTHAM G ROUP WorthamNet Business partnerships with 179 successful brokerages in 134 countries worldwide In-country knowledge and expertise Wortham quality, service and standards of coverage

40 T HE W ORTHAM G ROUP Wortham Assurex Global Partner Made up of nearly 70 of the largest independent P&C agencies in the U.S. and Canada Third largest brokerage organization in the U.S. and one of the largest globally Over $14 billion in annual premium Over 300 offices around the world Employs over 12,000 professionals worldwide

41 T HE W ORTHAM G ROUP Your Wortham International Correspondents Noble LocationsJLW Network Allow Non-Admitted BarbadosLynch Insurance BrokersMust be approved BrazilAdams & Porter Sociedade de Corretagem No Canada, AlbertaTrilagy Insurance & Financial Services, Inc.No (40% tax) Canada, Newfoundland Anthony Insurance, Inc.Yes Cayman IslandsCrusader International Management (Cayman) Ltd.Yes DenmarkDahlberg Assurance Brokers Ltd.Yes GermanyLeve & Nill GmbHYes NigeriaFemi Johnson & Company Ltd.No NorwayAon Grieg ASYes QatarArab Commercial Enterprises Qatar, Ltd.Yes ScotlandWillis Corroon Scotland LimitedYes The NetherlandsMeeus AssurantienYes United Arab EmiratesHSBC Insurance BrokersNo VenezuelaAsegure, S.A.No

42 Cost of Risk and Retention Analysis

43 T HE W ORTHAM G ROUP TOTAL COST ($) OF INSURANCE AND LOSSES ASSUMED What is the Optimum Level to Retain Risk? $0 Do we pay losses from funds available? How predictable and what is the estimated cost of losses retained ? What is the cost to transfer losses? FACTORS Aggregate Insurance Premiums Plus Retained Losses from Insurance Programs Cost of Risk = Premiums + Retained Losses

44 T HE W ORTHAM G ROUP Risk Retention Factors Materiality of extraordinary losses Frequency and severity of expected losses Cost and availability of insurance excess of various retention levels Companys degree of risk aversion

45 T HE W ORTHAM G ROUP Cash Flow After % Change in Loss Extraordinary Loss Cash Flow $5,000,000$229,000,0002.1% $10,000,000$ 224,000,000 4.3% $15,000,000$ 219,000,000 6.4 % $25,000,000$ 209,000,000 10.7% $50,000,000$ 184,000,000 21.4 % Risk Retention Materiality – Cash Flow 2003 Estimated Cash Flow from operations -$234,000,000 (annualized first six months)

46 T HE W ORTHAM G ROUP LossNet Income After % Change inChange in DecreaseExtraordinary LossNet IncomeE.P.S. $5,000,000$161,000,000-3.0%$0.04 $10,000,000$156,000,000-6.0%$0.08 $15,000,000$151,000,000-9.0%$0.11 $25,000,000$141,000,000-15.1%$0.19 $50,000,000$116,000,000-30.1%$0.38 Risk Retention Materiality – Net Income $166,000,0002003 Net Income (annualized first 6 months) 132,932,000Outstanding shares of common stock $1.25Earnings per share

47 T HE W ORTHAM G ROUP Retention Capacity Based on industry standards established by International Risk Management Institute (IRMI) in millions: MethodBasisLowHighMedian Working Capital* $173 $3.5 $26.0 $14.8 2-15% Total Assets*$3,098 $31.0 $154.9 $92.9 1-5% Earnings*$166 $5.0 $13.3 $9.1 3-8% Operating Margin*$227 $1.1 $2.8 $5.5 ½-2% * As of June 30, 2003 or annualized first 6 months of 2003

48 Marine, Liability and Casualty Insurance Renewal Strategies

49 T HE W ORTHAM G ROUP Worthams Objectives Relating to the Corporation Understand Your culture, operating philosophies, goals – corporate and risk management – ongoing Recognize past underwriting relationships Recommend changes when appropriate – keeping realistic creativity at forefront

50 T HE W ORTHAM G ROUP Worthams Objectives Relating to the Corporation Work hand-in-hand with you to reduce cost of risk, seeking maximum cost efficient transfer of risk given market conditions Constantly look for ways to enhance risk management support service Fully realize the Wortham mission statement for you Involve you in the marketing process

51 T HE W ORTHAM G ROUP Marine Package and Excess Liability Marketing Approach and Goals Utilize your culture, operating philosophies, corporate goals and approach to risk management as a positive marketing tool. Leverage Wortham's independence by seeking new marketing approaches from a number of sources. Develop coverage options and alternative structures that support your corporate goals without jeopardizing the possibility of completing any of the options or alternative structures. Enhance the effectiveness of your insurance program by exploiting the market whenever possible.

52 T HE W ORTHAM G ROUP Marine Package and Excess Liability Marketing Approach and Goals Examine the overall historical profitability of the of your account Exploit past relationships and historical goodwill Emphasize the effects of your safety and loss prevention initiatives throughout all all phases of the marketing process

53 T HE W ORTHAM G ROUP Marine Package Lloyds and Bermuda Brokers Used JLT Risk Solutions Miller Insurance Group Agnew Higgins Pickering Limited Benfield Greig First City Glenrand Simpson Health Lambert Newman Martin & Buchan, Ltd. Willis Bermuda Brokers HSBC International JLT Limited Park International We are Independent

54 T HE W ORTHAM G ROUP Marine Package and Excess Liability Market Issues The hard market cycle has leveled off. Certain segments of the market are showing signs of softening. Underwriters are beginning to write risks based on their merits rather than simply imposing a broad market approach. Attractive programs are oversubscribed If the market does not experience a major catastrophe, some Underwriters may find it difficult to reach their premium targets for the year.

55 T HE W ORTHAM G ROUP General Comments – Package and Liability Program Structure Large Multi-line Package Structure Primary/Excess Package Structure Examine the Package structure to determine if an All Lines approach or placing certain lines separately would be a more effective use of the market Exploit market resources to achieve the most comprehensive and cost effective program Explore the possibility of reducing the cost of risk through the use of an aggregate stop feature

56 T HE W ORTHAM G ROUP Maritime Employers Liability (P&I) Renewal Strategy Difficult class of business Key to success will be our ability to generate creative competition Markets to be approached Origin (AEGIS/Steamship Venture) WFT Incorporated Osprey – London Limit Syndicate Facility

57 T HE W ORTHAM G ROUP Primary Casualty Key Markets and their Issues Key markets are ACE, AIG, Liberty Mutual and Zurich All underwriters have reduction in investment income and concern over long tail issues such as asbestos Primary casualty underwriters are focused on issues of collateral and catastrophic exposures, especially terrorism

58 T HE W ORTHAM G ROUP Primary Casualty Risk Financing Strategy Risk transfer above selected retentions only a portion of cost of risk Loss analysis and forecasting to assist with Negotiation of risk transfer cost Retention analysis Reducing collateral requirements Internal budgeting and allocation alternatives Consider revising inception to minimize reinsurance treaty impact

59 T HE W ORTHAM G ROUP Primary Casualty Loss Forecasting Strategy Price Waterhouse Cooper (PWC) loss forecasting software calculates insureds own individual loss development factors Factors used to develop prior year losses to ultimate; forecast expected losses for renewal PWC software can only be used if triangles are available Insurers use their own factors Wortham can use commercial insurer factors or work with you to develop your own

60 T HE W ORTHAM G ROUP International Insurances - Controlled Master Program Non-admitted and admitted policies are placed with the same carrier Admitted policies are reinsured 100% by one international insurance company ACE, AIG, Zurich or Chubb Local/Admitted Placements in Various Foreign Countries Non-Admitted Excess – Difference in Conditions Program Various Excess Placements

61 T HE W ORTHAM G ROUP Controlled Master Program - Benefits Underwriting controlled by one underwriter, one broker and your risk management department Premium savings over one-off placements Standard and consistent level of coverage Avoidance of coverage duplication Avoidance of gaps in coverage Simplified claims handling Enhanced communications

62 Alternative Programs

63 T HE W ORTHAM G ROUP Outside the Box Ideas Risk Financing Programs Captive and finite risk programs could be considered for retention management purposes Potential tax planning opportunities Retention Adjustment Structures Structures allow for adjustment of retention based on current economic / business indices – rig count, for instance Provides for lower retentions and greater risk transfer when business is soft

64 T HE W ORTHAM G ROUP Outside the Box Ideas Loss Portfolio Transfer (LPT) Reduction of balance sheet reserves Reduction of required collateral Environmental Cost Caps Funding vehicle plus risk transfer for overruns Reduction of balance sheet reserves Potential tax planning opportunities

65 Broker Relationship & Compensation

66 T HE W ORTHAM G ROUP Service Agreement and Wortham Compensation Broker Service Agreement Detailed written agreement not essential Prefer simple letter agreement Compensation Annual fee in the form of negotiated commission No contingent commission, no wholesale commission, no hourly charges, no reconciliation Base compensation for annual services Incentive compensation to promote even greater value added Quarterly payment option suggested Incentive payable within 90 days of conclusion of annual period

67 T HE W ORTHAM G ROUP Negotiated Commission Proposal In addition to standard brokerage service, our fee contemplates: Claims Support & Consultation Including Coordination of Excess insurers Claim audit participation National account instruction oversight Electronic Certificates including Noble issuance of standard certificates Exposure survey – annual prepared with recommendations Assumption of prior year open items only extends to duration of Wortham service period

68 T HE W ORTHAM G ROUP Negotiated Commission Proposed Other Essential Aspects: Loss Portfolio Transfer fees separate Any placements made not in current program to earn standard commission Includes any due diligence on acquisitions or divestitures Negotiated commission is payable quarterly

69 T HE W ORTHAM G ROUP 3 Year Negotiated Commission Year 1Year 2Year 3Total Base (In 000s)

70 T HE W ORTHAM G ROUP Suggested Bonus Criteria Some suggested criteria for objective scoring: Timely policy / other documentation delivery Communication quality / timeliness of open items Delivery of certificates / contract review support Delivery of renewals within parameters established as part of the renewal process General support on other open risk management issues

71 Closing Comments

72 T HE W ORTHAM G ROUP We invite you to contact our Client Reference List Intentionally left blank

73 T HE W ORTHAM G ROUP Why Wortham? Wortham has the depth of staff and technical expertise to add value to your Risk Management initiatives. Independence model provides widest window to alternatives Wortham has a substantial amount of experience negotiating international programs We will build on your existing relationships while introducing competition Worthams hands-on approach to energy claims means the same people who negotiated the wording will adjust the claims

74 T HE W ORTHAM G ROUP Why Wortham? Our partnership business model is dedicated to providing very broad, high quality, meaningful service to our customers with long-term view Our strategy is to lower your overall cost of risk You would be an important energy related account for Wortham and would be handled with a sense of urgency We invite you to check our reputation with clients, underwriters and service providers

75 THANK YOU for this opportunity

Download ppt "University of Houston Bauer College of Business January 27, 2005 presentation by: Robert B. Hixon T HE W ORTHAM G ROUP Insurance & Risk Management."

Similar presentations

Ads by Google