A disciplined approach: Quincy Mutual Fire Insurance Co. puts a premium on strong investment returns while eschewing expansion.

Quincy Mutual Fire Insurance I Co. probably wouldn't excite Wall Streeters, but it has made A lasting impression on people who rate its ability to meet ongoing obligations to policyholders.

That's because the Quincy, Mass.-based property/casualty insurer sticks to a discipline that focuses on risk selection through long-established agents and values controlled rather than rapid growth, a discipline that is usually anathema to the quarterly earnings crowd. That may be one of the reasons it is one of only 15 companies to be ranked A+ or higher by A.M. Best Co. for the past 50 years.

"Our main strategy has been to maintain a low leverage in premium writings to surplus," said K. Douglas Briggs, president and chief executive officer. "If you're a stock company, that strategy might not be palatable. "At the end of last year, the ratio of net premiums written to surplus was a mere 77%; by midyear, it had fallen to 73% on an annualized basis thanks to strong growth in the surplus. Five years ago the ratio was below 50%. What a low ratio means is that Quincy's return-on-equity potential is muted, though Briggs said it "has been very acceptable" over the years.

That return-on-equity has been boosted by the company investing far more aggressively in stocks than the average domestic insurer. Because the low-leverage underwriting strategy lowers operational risk, the company's leadership feels comfortable with greater leverage on the investment side. That means more freedom to invest in stocks, and Quincy's investment policy permits up to 50% of assets to be held in equities.

Over the years, taking the investment risk has yielded handsome returns, albeit with some rough periods. But Briggs said the company has managed the risks by buying highly rated equity securities and using outside professional money managers to help. "There's definitely been some volatility, but as a well-capitalized mutual, we've had the luxury for many years of being a buy-and-hold equity investor," he said.

At one time, Quincy wrote business in 21 states, but as part of implementing its strategy, it cut back to seven: Massachusetts, Connecticut, Rhode Island, Maine, New York, New Jersey and Pennsylvania. This tightening allowed the company to develop closer relationships with its 500 or so independent agents and a better understanding of state regulatory environments and local market conditions, said Tom Harris, senior vice president and treasurer.

Briggs couldn't recall any major crises the company had to address other than the ongoing challenges of the Massachusetts personal auto market and risks of writing hurricane-exposed homeowners policies in New England. Quincy focuses on pricing, risk selection, agent services, and claims settlement, he said.

Briggs readily admits that Quincy's strategy has cost it some growth, but he adds that success is in the eye of the beholder. "To grow for growth's sake is not the answer today," he said.

Quincy Mutual Fire
Insurance Co.

Ratio Comparison

                   1998     1999     2000     2001     2002

Combined Ratio    101.3    102.4    109.3    105.3    103.7
Opening Ratio      89.6     91.6     98.4     95.1     94.5

Note: Table made from line graph.

Then And Now

                        1953              2002

Assets           $14 million    $760.4 million
Net Premium    $21.3 million    $276.7 million

Source: A.M. Best Co. Executive Summary
Report; A.M. Best Company Report