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FM Global
FM Global is a mutual insurance company focused on commercial property insurance. It has a global presence in over 130 countries and over $10 billion in policyholder surplus. FM Global is known for its engineering-driven underwriting and prioritizes loss prevention and risk control. Its strategic priorities include growing business with existing customers, accessing new markets through data analytics, and continuing excellence in research.
FM Global
- 1. AJ Buono Ethan Foster ElizabethClarke Nicholas D’Orazio Jennifer SantaMaria
- 2. FM at aglance • Mutual insurance company domiciled in Rhode Island • Global commercial & industrial property insurance Operations spanning 130 countries PHS in excess of $10 billion • Known for engineering-driven UW Loss prevention & loss control Value proposition • Narrow focus → large market share
- 3. History ● Zachariah Allen ○1848: Rhode Island Mutual ○ Years later: Factory Mutual ● 1874: Supported creation of fire sprinkler ● 1878: Collective Inspection Unit is formed ○ Inspection, appraisals, adjustments, loss analysis and research activities ● 20th Century: began expansion to other markets ● 1999: Merged with 3 other entities to create FM Global ○ Allendale Mutual, Arkwright-Boston Manufacturers Mutual, Protection Mutual
- 4. Structure ● AFM ○ Commercialproperty for mid-size businesses ● FM Approvals ○ Certifies products and services for companies ● FM Global Cargo ○ Comprehensive cargo coverage ● Mutual Boiler Re ○ Boiler Reinsurance ● Emergency Response Consultants ○ Emergency response for fire brigades, hazardous material emergency responders, technical and confined-space rescue teams, emergency medical services and local fire departments.
- 5. Key Executives ● ThomasA. Lawson- President & CEO since 2014 ○ On the Board of the National Fire Protection Association & Member of National Society of Mechanical Engineers ○ Graduated from Illinois University with Degree in Occupational Safety ● Shivan S Subramaniam- Chairman (Former CEO from 1999-2014) ○ Degree in Mechanical Engineering from a University in India ● Jonathan Hall - Executive VP & COO since 2014 ○ Degree in Management ● Backgrounds in Engineering and various safety programs contribute to FM Global’s superb engineering expertise & inspection and loss prevention services
- 6. Board of Directors •Members of Board are in high leadership positions at their various companies/organizations Disney, MLB, GlaxoSmithKline, USAA, RR Donnelley, Caterpillar, etc. • Many clients sit on Board of Directors, advisory boards, risk management councils o Ex. Edward Rapp, Group President of Construction Industries at Caterpillar (one of FM Global’s largest clients) o Beneficial to hear client needs firsthand at board meetings o Contributes to long-term partnerships with clients → 95% retention ratio in 2015 • Out of 13 board members, only 2 are women
- 7. Mission “We have aunique risk management focus. Our clients look to us to develop cost- effective insurance and risk-financing solutions, to minimize business interruption and financial impact if a loss does occur.” Meet these needs with customized programs that draw upon: State-of-the-art loss prevention engineering and research Risk management skills and support services Tailored risk-transfer capabilities Superior financial strength
- 8. FM in theIndustry
- 9. Products / Services Products ●All Risk Property Coverage (FM Global Advantage Policy) ● Business Interruption Coverage (Time Element Select Policy) ● Sustainability Coverage (Sustainability Select Policy) ● All Risk Boiler and Machinery Coverage ● Customized Cargo Coverage (as standalone or with risk policies) Services Site Evaluations Unique Cargo Risk Engineering Services Risk Quality Benchmarking (RiskMark, Engineering Data Reporting Tools) Project Planning Client Training Supply Chain Risk Management Product Certification
- 10. FM Global AdvantageAll-Risk Property Policy A product designed to keep your business “resilient” Includes: Coverage for Scheduled, Misc. Property, and Business Interruption ● Expanded coverage for Cyber, “Cloud” Services, & options to expand coverage to suppliers through Contingent Time Element and Logistic Extra Cost options Benefits: Maximizes risk transfer and improved contract certainty The ability to scale the policy to fit your needs
- 11. Supply Chain RiskManagement Available through FM Global Advantage Expert risk assessment Extend coverage through suppliers’ suppliers Global Resilience Index Ranks resilience of 130 countries Prioritization & insights
- 12. Customers Core strength isforming long-term strategic partnerships with clients FM seeks customers that view risk management as an investment Large commercial companies 95% customer retention rate Major customers include: Caterpillar, Modine, Mercy and HSN
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- 14. Underwriting Results Loss Ratio YearFM CB TRV ZURN 2010 51% 58% 61% 71% 2011 95% 64% 73% 72% 2012 60% 64% 65% 70% 2013 51% 54% 58% 68% 2014 50% 55% 58% 67% AVG 61% 59% 63% 70% Expense Ratio Year FM CB TRV ZURN 2010 28% 31% 32% 27% 2011 25% 32% 32% 27% 2012 24% 32% 32% 28% 2013 28% 32% 32% 30% 2014 26% 33% 31% 31% AVG 26% 32% 32% 28% 2011 - Natural hazard losses added ~53 points to combined ratio 2012 - Sandy added ~13.5 points to combined ratio
- 15. Profitability • Driven bystrong underwriting • Investments Inv Yield 2.2% vs Industry 2.7% Inv Inc Growth 3.9% vs Industry -2.9% Fueled by growth in invested assets • Membership credits 2014 ~$465 million 7th credit since 2001
- 16. Risk Profile • BCAR378.6 & RBC 439% AM BEST “A+” ; Fitch “AA” ; S&P “A+” • High deductibles & attachment points • No debt issued • Elevated common stock leverage • Facultative Coverage requirements outside UW criteria • Excess-of-loss $1.23 billion X $250 million per-risk retention $1 billion X $500 million per-CAT retention • Berkshire Hathaway & Swiss Re ~16% of ceded premium Reinsurance Program
- 17. Reserves • Less reservingrisk relative to peers o Short-tail nature of risks o Develop into paid losses within 3 years o Favorable AY development Gg • Asbestos & Environmental o Discontinued reinsurance operations o 27% of total reserves ~$650M o Chubb ~$478M ; SR: 6.9
- 18. Reserves ● Driver: discontinuedreinsurance operations ○ A&E exposure
- 19. Strengths • Non-Traditional BusinessModel Prevention is first priority • Underwriting 61% loss ratio • Expense management 26% expense ratio • Customer retention 95% retention • Well Capitalized Able to absorb losses and volatility $10 Billion PHS
- 20. Weaknesses • CAT exposure Volatileunderwriting results • A&E exposure Continuous unfavorable development • Property-only focus Contributes to undiversified book of business
- 21. Opportunities • Data analytics Exploitdata to drive new business & cross-selling • Supply chain & cyber Utilize FM Global Resilience Index • Emerging markets 8-9% expected growth Emerging Asia: ~12% expected growth
- 22. Threats ● Competition ○ Risk-engineering ○Line bundling ● Global environment ○ Macroeconomic ○ Political ● Foreign exchange ○ Impact of strong $USD ○ Foreign currency translation ■ ($126 M) in 2015 ● Insurance regulation
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- 24. 1. Grow businesswith existing customers
- 25. 2. Access new& emerging markets through data
- 26. 3. Continue excellencein research • Research sets FM apart • Crucial to continue innovating and investing • Large companies could imitate their business strategy AIG Chubb
- 27. Today → Tomorrow •Currently positioned well in the market Excellent performance Market share Retention • Looking ahead Grow with existing customers Access emerging markets Continued excellence in research → solidify FM as the premier commercial property insurer
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Editor's Notes
- #8 FOCUS ON CREATING VALUE FOR CUSTOMERS, to create value for owners Vision for improving profitability for firm and provide more/better services
- #9 Middle Mkt Specialty: Affiliated FM, FM Global Cargo Commercial: FM Global, Mutual Boiler Re, FM Global Cargo Reinsurance: Mutual Boiler Re
- #14 Writes 5.27% of industry fire 8.74% of allied lines 5.91% of inland marine 22.93% Allied lines - closely related to fire; coverage for accounts receivable, water damage, vandalism, demolition, increased cost of instruction Inland marine - property in transit equipment (golf, (floaters)
- #15 CR 87% 2014 76%
- #16 11% ROE
- #17 Authorized reinsurers Reinsurance purchased 762M
- #18 (Case+IBNR)/(avg 3 yrs past losses) -----nobody really knows the benchmark Survival ratio (13.7) is below industry composite; better than Chubb (6.9) Industry 15.1
- #19 Favorable AY development since 2006 Prior - adverse development = $222M unfavorable
- #20 Business model & retention are a function of mutual structure 2010 - low -10% finished at 15% growth 2009 Equities 31% growth 2008 equities -38% total -20% LR 79% → LOST MONEY Zurich: 1% growth
- #21 Graph illustrates the volatility >>>>ZURICH UP 1% in 2008 shows that high common stock leverage is BAD<<<<< 2010 - low -10% finished at 15% growth 2009 Equities 31% growth 2008 equities -38% total -20% LR 79% → LOST MONEY Zurich: 1% growth
- #22 India, china, southeast asia, malaysia Global flood mapping Analytics Resilience index ALL FEED INTO EMERGING MARKETS *political destabilization
- #23 Loss of profit from premium if converted from weak currency to strong dollar Global flood mapping Analytics Resilience index ALL FEED INTO EMERGING MARKETS *political destabilization
- #25 Opportunities - insights into buying patterns & habits → who IS & who ISNT buying cyber & supply that should --- what is DRIVING this purchasing habit/behavior
- #26 Flood mapping & resilience index → who & where do we want to write Predictive analytics - current that are profitable, potentials that resemble current insureds, want to invest in RMI Go to market with the all risk, stressing supply chain & cyber Access emerging markets