Rising Starr: C.V. Starr & Co. Inc. agencies vow to succeed without the help of--and in competition with--AIG.Not too long ago, American International Group
American International Group, Inc. (AIG) (NYSE: AIG; TYO: 8685 ) is a major American insurance corporation based in New York City. viewed the managing general agencies run by C.V. Starr & Co. Inc., specialists in hard-to-place commercial coverages, as an indispensable part of its business. The world's largest and arguably ar·gu·a·ble adj. 1. Open to argument: an arguable question, still unresolved. 2. That can be argued plausibly; defensible in argument: three arguable points of law. most sophisticated insurer resisted pressure from certain shareholders to separate from the Starr agencies, insisting that in spite of its size, the corporation lacked the capability to perform many of the services provided by Starr's managing general agents. Bernd Heinze, executive director of the American Association American Association refers to one of the following professional baseball leagues:
AIG American International Group, Inc AiG Answers in Genesis (religious group in defense of Scripture) AIG Artificial Intelligence Group AIG Australian Industry Group would not be able to duplicate or exceed the established brand value, premium and investment income at the combined ratios and underwriting profit Underwriting profit is a term used in the insurance industry. It consists of the earned premium remaining after losses have been paid and administrative expenses have been deducted. It does not include any investment income earned on held premiums. levels, ... negotiate favorable terms and conditions with reinsurance The contract made between an insurance company and a third party to protect the insurance company from losses. The contract provides for the third party to pay for the loss sustained by the insurance company when the company makes a payment on the original contract. companies for the specific risks insured, or achieve the same level of return on equity" without maintaining the agency relationships. AIG's chief executive, Martin Sullivan Martin Sullivan may refer to one of the following people:
The officer of a firm responsible for day-to-day management, usually the president or an executive vice-president. , warned at that time that a breakup breakup The division of a company into separate parts. The most famous breakup to date was the 1984 division of AT&T (formerly, American Telephone & Telegraph Company). This breakup was intended to increase competition in the communications industry. with the Starr agencies would permit competitors to "swoop swoop v. swooped, swoop·ing, swoops v.intr. 1. To move in a sudden sweep: The bird swooped down on its prey. 2. in tomorrow" and establish relationships with brokers and customers who until then had given their business to the Starr agencies. They would jump at any opportunity "to pry open any crack that might appear and provide capacity to replace AIG all or in part" he said. Of course, that was all before AIG's relations with C.V. Starr disintegrated to their current acrimonious state, before AIG began severing sev·er v. sev·ered, sev·er·ing, sev·ers v.tr. 1. To set or keep apart; divide or separate. 2. To cut off (a part) from a whole. 3. ties to the Starr agencies, before the insurer accused Starr Technical Risks of being a "rogue agent" before the companies sued each other for rights to the "Starr" trademark, and before an accounting scandal caused AIG's board to force out Chairman and Chief Executive Officer Maurice R. (Hank) Greenberg--who left grudgingly grudg·ing adj. Reluctant; unwilling. grudg  ing·ly adv.Adv. 1. , but with the agencies in tow. Indeed, some of Sullivan's predictions have manifested already. Warren Buffett's Berkshire Hathaway Berkshire Hathaway (NYSE: BRKA, NYSE: BRKB) is a conglomerate holding company headquartered in Omaha, Nebraska, U.S., that oversees and manages a number of subsidiary companies. swooped in this year and signed the Starr agencies to write its policies. Buffett himself recently called Greenberg's agency "a respectable organization. We have no problem. In fact, we look forward to doing a lot of business with them just like we do with Marsh & McLennan or whomever whom·ev·er pron. The objective case of whoever. See Usage Note at who. whomever pron the objective form of whoever: ." Building a New Empire These days, Greenberg, 81, no longer runs the insurance empire he built. He's plotting a new one from his 17th-floor office on Park Avenue in New York City New York City: see New York, city. New York City City (pop., 2000: 8,008,278), southeastern New York, at the mouth of the Hudson River. The largest city in the U.S. , even as he prepares to face New York state Attorney General The New York State Attorney General is the chief legal officer of the State of New York. The office has been in existence in some form since 1626, under the Dutch colonial government of New York. Eliot Spitzer Eliot Laurence Spitzer (born June 10 1959 ) is an American lawyer, politician and the current Governor of New York. Spitzer was elected governor in the November 2006 election. in court, this summer, on accounting fraud charges. His plan involves a rapid build-up build·up also build-up n. 1. The act or process of amassing or increasing: a military buildup; a buildup of tension during the strike. 2. of the four insurance agencies he controls as chairman and chief executive of C.V. Starr & Co. by re-enforcing the Starr brand through heavy advertising, expanding the agencies' geographic footprint domestically and overseas, investing in new products and partnerships and recruiting top talent. For decades, the Starr agencies--American International Marine Agency of New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of Inc. (AIMA AIMA Alternative Investment Management Association AIMA All India Management Association AIMA Artificial Intelligence: A Modern Approach (textbook) AIMA Associazione Italiana Malattia di Alzheimer ); Start Aviation Agency Inc., formerly AIAA AIAA American Institute of Aeronautics and Astronautics, Inc. AIAA Associate Insurance Agency Administration (LOMA insurance program) AIAA Aerospace Industries Association of America, Inc. ; Start Technical Risks Agency Inc., and C.V. Starr & Co.--lived trader the shadow of AIG. Their histories are inextricably in·ex·tri·ca·ble adj. 1. a. So intricate or entangled as to make escape impossible: an inextricable maze; an inextricable web of deceit. b. intertwined: C.V. Starr was created by AIG's founder, Cornelius Vander Starr Cornelius Vander Starr (October_15, 1892 - December 20, 1968) was an American businessman. He founded the American International Group insurance corporation. Starr was born in Fort Bragg, California, where his Dutch father was a railroad engineer. , in China in 1919. In 1970, after his insurance business had grown to encompass a group of agencies and companies all over the world, Starr sold the majority of his assets to what became American International Group, but held on to several small domestic agencies. That's how the Starr agencies came to be a separate, but related entity of AIG. Playing the role of managing general agents, they were authorized to market, underwrite To insure; to sell an issue of stocks and bonds or to guarantee the purchase of unsold stocks and bonds after a public issue. The word underwrite has two meanings. and issue policies, collect premiums, adjust and pay claims, and even negotiate reinsurance agreements on behalf of AIG. In recent years, C.V. Starr said it generated about $2 billion in annual premium for AIG, business it obtained primarily through the brokerage community; the Marshes, the Aons, and the Willises of the world rely on C.V. Starr to provide tailored, specialty coverage for their clients. In return, the privately held company privately held company A firm whose shares are held within a relatively small circle of owners and are not traded publicly. received hundreds of millions of dollars in compensation from AIG--a cozy See COSE. relationship that frequently raised eyebrows about the propriety pro·pri·e·ty n. pl. pro·pri·e·ties 1. The quality of being proper; appropriateness. 2. Conformity to prevailing customs and usages. 3. proprieties The usages and customs of polite society. of a publicly traded company publicly traded company A company whose shares of common stock are held by the public and are available for purchase by investors. The shares of publicly traded firms are bought and sold on the organized exchanges or in the over-the-counter market. doing business with a private affiliate owned by the public company's top executives. Last year, C.V. Starr offered to sell the agencies to AIG, "but their offer was well below value, and we were never close to a mutually agreeable price," company spokesman Howard Opinsky said. "We also offered to enter into a long-term underwriting agreement Underwriting agreement The contract between a corporation issuing new publicly offered securities and the managing underwriter as agent for the underwriting group. Compare to agreement among underwriters. between the Starr Agencies and AIG, but AIG never responded to that offer." Presently, AIMA is the only Start agency still authorized to write AIG insurance, and it's uncertain how long that relationship will last. As for the parent company, C.V. Starr, it is looking forward to a new future, one that undoubtedly would involve aggressively competing with AIG for many years to come. Aviation Tug-of-War Starr Aviation, founded in 1961, provides liability cover for airlines, major product manufacturers, airports and repair facilities. The agency now intends to enter other classes of the general aviation market both domestically and overseas. This expansion includes entering the workers' compensation workers' compensation, payment by employers for some part of the cost of injuries, or in some cases of occupational diseases, received by employees in the course of their work. market in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. , Steve Blakey, the company's president, said. In March, Starr Aviation, the first of the four Staff agencies to have its contract terminated by AIG, aligned with Marlborough Underwriting Underwriting 1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. Agents, a Berkshire Hathaway Group company, to offer worldwide cover under Lloyd's licenses. Blakey said Staff Aviation is talking to Noun 1. talking to - a lengthy rebuke; "a good lecture was my father's idea of discipline"; "the teacher gave him a talking to" lecture, speech rebuke, reprehension, reprimand, reproof, reproval - an act or expression of criticism and censure; "he had to other potential insurance partners. AIG sued Starr Aviation earlier this year for allegedly continuing to conduct business on its behalf without authorization. In that suit, Blakey, who resigned from AIG Aviation in December 2005, was accused of raiding AIG employees, taking with him 24 of his colleagues to Starr Aviation. AIG said it was forced to retaliate by recruiting several employees from a Starr Aviation subsidiary in the United Kingdom, called Redholm Underwriting Agents Ltd. The tug-of-war between the two, Blakey said, has had "little impact" on Starr Aviation's operations. "We have a reputation, a lot of contacts in the marketplace. I've worked for those brokers my entire career, so they continue to bring the business in." Redholm has since been renamed Starr Underwriting Agents Ltd., Blakey said. Starr Aviation currently has 34 employees between offices in Atlanta and London, where it is building a new platform to sell aviation products on a worldwide basis. Since it began offering Marlborough coverage March 8, Blakey said the agency has seen every major account that's come up for renewal in the marketplace. "We're getting our fair share, but the majority of the business will hit later in the year, in the fourth quarter of 2006, and that gives me the opportunity to build the team in time for renewal season" he said. New Energy Partners Starr Tech, which writes first-party property insurance in the energy sector, is planning to enter the international risks arena. In the past, the agency focused on U.S. and Canadian-domiciled companies, President Richard Shaak said. "We're now looking at the international markets, and will be staffing up in New York, London, as well as in Asia." While the company's expertise is in the oil, gas, petrochemical and chemical industries, Starr Tech also writes coverage for utility, mining, pulp and paper, and electronic companies. Recently, the agency announced it would be offering commercial coverage by Ace USA and Berkshire Hathaway--agreements that provide Starr Tech $200 million of in-house underwriting capacity. This agreement came days after AIG publicly announced it no longer was writing business through Starr Tech. In January, AIG sued Starr Tech for entering into what it called "unauthorized reinsurance arrangements" with Berkshire. Aspects of this complaint remain in arbitration, although Starr Tech insists it has the right to partner with any underwriter it wishes. "We've always been an independent agency, even though we've represented AIG for almost 37 years. It would have been great if we could have continued the relationship, but sometimes, two parties need to move in different directions," Shaak said. "Now, we're looking forward to building our future with Berkshire and Ace." Shaak said Starr Tech, founded in 1968, hasn't decided where in Asia it wants to set up shop, but China and Singapore are top on the list. A Public-Entity Presence in N.Y. The San Francisco-based C.V. Starr & Co. already has launched new operations on the East Coast and is planning others in key U.S. Southern cities. The company, founded in 1953, writes casualty insurance for all but four of the counties in California The U.S. state of California is divided into fifty-eight counties. Counties are responsible for all elections, property-tax collection, maintenance of public records such as deeds, and local-level courts within their borders, as well as providing law enforcement (through the county , as well as special districts, water districts, utilities, schools and tribal nations. It is looking also at expanding its construction business throughout the United States. William Weichold, the company's president, said the agency opened a New York operation in late April called Pacific Starr of New York. It has a total of 60 employees, and currently is teaming with Starr Tech to begin offering other non-casualty products to its public-entity clients, Weichold said. Jeff Hafter, previously national accounts division head at AIG Specialty Excess Unit, will run the New York operation. His task also involves developing the next Starr agency, perhaps, through an acquisition. "These are decisions that have to be made, and we want a management team in place in New York to discern what we should do, how we should do it, and who should do it," Weichold said. A New York presence will be key to the construction business of C.V. Starr (California). "Many of the very large national accounts and commercial accounts market their business through New York, and if we're going to be the casualty insurance platform for the C.V. Starr group of agencies, we really need to be there" he said. When the C.V. Starr (California) contract with AIG terminated May 14, a new partnership with Everest National kicked in the next day. Start pursued Everest Re as its new partner to replace AIG, Weichold said, because "their back-shop operation is so dynamic, and they have the support that we need to develop our future products." Like Blakey, Weichold insists the AIG breakup hasn't disrupted operations. "As far as our brokerage community goes, they are very anxious to have us write on behalf of Everest National. They appreciate the fact that we have the financial strength of C.V. Starr, and the leadership of Hank Greenberg
Last year, the public entity class of business had a retention rate of well over 90%, Weichold said. He expects it will remain as high this year. "The relationships that our brokers have had over the years have been with us, with C.V. Starr (California). That relationship is in place," he said. One Link With AIG So far, there's no indication AIMA's relationship with AIG will be changing, said President David French David French was born in 1939. When David was six years old he moved to Toronto from Coley’s Point Newfoundland. During his young school years David was a sport fanatic, he did not enjoy the academic side of school. . "We're still under contract, and we're still approached by our major clients and brokers as AIG's managing general agency in North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. for ocean marine business," he said. "If AIG has any plans otherwise, they'd best answer that." French said AIMA continues to provide stellar financial results for AIG. The agency's retention rate is between 87% and 90%, and its gross production growth for April, he said, was above the mutually agreed target. "We anticipate our gross written premium for this year would be roughly $300 million." It's possible AIG doesn't want to disturb this partnership. AIMA, formed in 1945, currently has 4,000 clients, comprising the nation's top shippers--exporters and importers. The agency also provides marine casualty and liability coverage, including terminal operators' legal liability and shippers' peril liability, both on a primary and excess casualty level, and is known around the world for its loss control expertise. French said AIMA, too, will be concentrating on cross marketing opportunities with its sister agencies. He's currently working with Weichold to provide new products for port clients and with Shaak's Starr Tech on opportunities with onshore energy clients. "That's the beauty of the infrastructure and investment that's being made in C.V. Starr," he said. On Its Own Does C.V. Starr have what it takes to go head to head with AIG and distinguish itself in the commercial brokerage community without AIG's help? C.V. Starr wouldn't discuss the commission terms it has with new carriers, but Opinsky said the company is "very satisfied with our arrangements and expects that the collective premiums for the Starr Agencies in the future will exceed historical levels." The fundamentals of how their businesses are run will differentiate them from competitors, the agency heads say. That means, holding on to key clients, broker and insured relationships will be crucial. It also means maintaining C.V. Starr's widely-regarded loss control, claims and underwriting expertise. "We will grow because people want to do business with us. The brokerage agencies that we deal with have arms throughout the entire United States, so we won't have to introduce ourselves to new brokerage communities. It would be an easy transition for us," said Weichold. * Until relationships soured, American International Group resisted pressure to separate from the Starr agencies, insisting that it lacked the capability to perform many of the services provided by C.V Starr's managing general agents. * C.V. Starr is planning to grow its four insurance agencies by re-enforcing the Starr brand through heavy advertising, expanding the agencies' geographic footprint domestically and overseas, investing in new products and partnerships and recruiting top talent. * To survive, the Starr agencies realize they must hold on to key relationships developed over decades as managing general agents of AIG. C.V. STARR & CO. INC. Starr Players Maurice R. (Hank) Greenberg Chairman and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. of C.V. Starr & Co. Inc. C.V. Starr & Co. Inc. comprises four agencies: American International Marine Agency of New York President: David French Headquarters: New York Lines of Business: Ocean marine; marine casualty and liability coverage Number of Employees: 96 Starr Aviation Agency Inc. President: Steve Blakey Headquarters: Atlanta Lines of Business: Liability cover for airlines, major product manufacturers, airports and repair facilities Number of Employees: 34 Starr Technical Risks Agency Inc. President: Richard Shaak Headquarters: New York Lines of Business: First-party property insurance in the energy sector Number of Employees: 110 C.V. Starr & Co. President: William Weichold Headquarters: San Francisco San Francisco (săn frănsĭs`kō), city (1990 pop. 723,959), coextensive with San Francisco co., W Calif., on the tip of a peninsula between the Pacific Ocean and San Francisco Bay, which are connected by the strait known as the Golden Lines of Business: Excess commercial casualty, excess liability, public entity business, residential and contracting business Number of Employees: 60 "We're now looking at the international markets, and will be staffing up in New York, London, as well as in Asia." --Richard Shaak, Starr Technical Risks Agency AIMA will be concentrating on cross marketing opportunities with its sister agencies. "That's the beauty of the infrastructure and investment that's being made in C.V. Starr." --David French, American International Marine Agency of New York "The relationships that our brokers have had over the years have been with us, with C.V. Starr (California).That relationship is in place." --William Weichold, C. V. Starr & Co. "The majority of the business will hit later in the year, in the fourth quarter of 2006, and that gives me the opportunity to build the team in time for renewal season." --Steve Blakey, Starr Aviation Agency EMERGING FROM THE SHADOW OF AIG: Intermediary C.V. Starr aims to carve out to make or get by cutting, or as if by cutting; to cut out. - Shak. See also: Carve its own turf. Presidents of its four agencies are William Weichold (seated), Steve Blakey, Richard Shaak and David French (standing, left to right). [ILLUSTRATION OMITTED]
The Original Team
C.V. Starr & Co. Inc. and American International Group enjoyed
a mutually profitable relationship until 2005.
Starr Commissions Paid by AIG
1999 2000 2001
Starr Marine $8,474,000 $9,350,000 $10,949,000
Starr California 20,182,000 31,201,000 31,097,000
Starr Tech 8,141,000 10,435,000 22,494,000
Starr Aviation 17,585,000 15,968,000 22,606,000
Starr Associates 0 0 164,000
Total $54,382,000 $66,954,000 $87,310,000
2002
Starr Marine $13,409,000
Starr California 46,780,000
Starr Tech 16,584,000
Starr Aviation 36,392,000
Starr Associates 434,000
Total $113,599,000
AIG Premiums Earned From Starr-Generated Business
1999 2000 2001
Starr Marine $95,580,000 $101,127,000 $103,205,000
Starr California 74,723,000 108,414,000 107,532,000
Starr Tech 30,920,000 36,259,000 120,730,000
Starr Aviation 79,109,000 75,287,000 126,486,000
Starr Associates 7,000 5,000 1,815,000
Total $280,399,000 $321,092,000 $459,768,000
2002
Starr Marine $126,712,000
Starr California 170,931,000
Starr Tech 208,857,000
Starr Aviation 255,280,000
Starr Associates 5,128,000
Total $766,908,000
Source: Special Litigation Committee of American International Group
Inc.
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