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| Around The Grange |
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Patrons Group to link with Ohio insurer |
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By Diane Levick, Hartford Courant (11/7/07) |
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DECEMBER 2007 --
The Patrons Mutual Group, a small and struggling Glastonbury-based insurer whose roots reach back 174 years, is planning to shed its independence and affiliate with State Automobile Mutual Insurance Co. in Columbus, Ohio.
The agreement between the mutuals, which are owned by their policyholders, is not a merger or acquisition as stock companies would engage in, and there is no purchase price. Instead, the accord involves a pooling of operating results, which would begin Jan. 1, subject to regulatory approval.
The deal would allow the Patrons group, which includes Litchfield Mutual Fire Insurance Co., to remain in Connecticut and grow, aided by State Automobile’s higher financial health ratings.
Patrons’ history is steeped in a more agricultural era, when it was created by Connecticut Grange members to protect against fire in rural areas.
The Patrons group has expanded to Rhode Island, Vermont and Massachusetts and writes personal auto and homeowners insurance. It also sells insurance for small “Main Street” businesses, farms, apartment buildings, bed-and-breakfasts, and contractors such as carpenters, plumbers and electricians.
Patrons has about 47,000 policyholders, including 25,000 in Connecticut, and expects to write about $45 million of premiums companywide this year. The affiliation with State Automobile will bring more product offerings, such as workers’ compensation and commercial auto insurance, which Patrons doesn’t sell now, said Bill Siclari, Patrons’ chief executive.
State Automobile currently sells insurance in 29 states, writing about $1.17 billion of property-casualty premiums last year. It has about 2,200 employees
The accord will also enable Patrons to access the Ohio company’s more detailed pricing systems, which aim to peg premiums more precisely to risk. The programs, already used extensively by Travelers, The Hartford and other large insurers, could mean lower premiums than Patrons would have otherwise charged some of its customers, and higher premiums for some others, Siclari said.
Patrons has about 76 employees in the state, and no layoffs are planned, he said.
The Glastonbury and Litchfield offices will remain open for at least 10 years under the agreement, and the Patrons name will continue to be used during that time.
Patrons will continue to be the employer, though workers are expected to become employees of State Automobile Mutual or one of its affiliates as of Jan. 1, 2009.
Siclari said State Auto Financial Chief Executive Robert P. Restrepo Jr. first approached him in August 2006, looking for an entrance into New England, and serious talks began in March of this year. State Automobile Mutual Insurance Co., which owns 65 percent of the publicly traded State Auto Financial, doesn’t sell insurance here. The insurer has applied for a Connecticut license from the state Insurance Department.
State Auto Financial was named the best managed insurance company in America for 2006 by Forbes magazine. Restrepo, a Yale University graduate, had held senior positions at Aetna and Travelers. In 1996 he was named head of Travelers’ personal insurance lines.
State Automobile is “a cultural fit for us because they don’t know New England, so we bring a lot of value to them,” Siclari said. And State Automobile has what the much smaller Patrons needs an A+ (superior) rating from A.M. Best Co., capital, technology and more precise pricing systems.
Trying to compete with a B++ rating has been tough for Patrons, Siclari acknowledged. Though Best defines B++ as “very good,” mortgage lenders and agents want to see an A or better rating. Patrons and State Automobile sell through independent agents.
Bill Meyer, a principal of Anderson-Meyer Insurance Inc., a Glastonbury agency, said that with the State Automobile affiliation, “Patrons becomes a viable company again ... I think it’s a good idea; it keeps them competitive as a regional company.”
Patrons and other small property insurers have been reeling in recent years from huge price increases on their reinsurance, stemming from concern about the potential impact of hurricanes along the coast after storms like Katrina. Insurers buy reinsurance from other companies to protect themselves from catastrophic losses.
Siclari said the past reinsurance price spikes and coastal situation weren’t big factors in the decision to affiliate with State Automobile. He was more concerned about the need for better technology to connect insurance agencies with the company, pricing systems and financial strength.
The Patrons group had a rough first quarter with some big claims this year, and expects to post a small net loss for the first nine months of 2007, Siclari said.
Under the affiliation, Patrons and State Automobile will pool financials premiums, losses and expenses and share them on a percentage basis. The Patrons and Litchfield Mutual will share a total of 0.5 percent of the pool.
Although State Automobile will also gain control over Patrons Fire Insurance Co. of Rhode Island and Provision State Insurance Co., neither company will participate in the State Auto Pool because they have no policies in force.
The accord is subject to approval by the Connecticut Insurance Department, which has scheduled a public hearing on it for Nov. 20 at 10 a.m. in its Hartford offices.
Special meetings for Patrons and Litchfield policyholders to vote on the agreement will be held Nov. 27.
Siclari, 58, plans to stay on at the Patrons Group through 2008 and then retire.
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