By: Michael Buck, Senior Associate Editor | BestWeek | Published: May 11, 2012
WASHINGTON - Ullico Inc. is shedding some lines of business and focusing on its core businesses after enduring a sluggish economy and a strategy drift with some former company executives, the company's chief executive officer told Best's News Service.
Ed Smith, who was named CEO in January 2011, said his company's base of customers, which is primarily unions particularly in the building trades, have been hit "harder than most" by economic downturn. He said the building trades have had some of the highest unemployment rates "since the Great Depression."
"We're weathering that storm and we see some light at the end of the tunnel about the economy coming back and some increase in job activity," Smith said.
While Ullico's life insurance arm, Union Labor Life Insurance Co., had an upgrade in it's Best's Financial Strength Rating in July to B++ (Good) from B+ (Good), the company's casualty arm, Ullico Casualty Co., was downgraded to B (Fair) from B+ (Good). One factor A.M. Best Co. analysts cited in the ratings action was the departure of some of its senior management.
"They simply took the company in the wrong direction," Smith said. "They were going to leave one way or another, whether they were terminated or left on their own."
Smith said the company in years past had gotten "ourselves into some lines of business that we shouldn't have been in" and those are now starting to unwind. Smith said the company is exiting the surety business and some of its program workers' compensation business. The company in 2011 also wrote off a $13.5 million real-estate equity fund that the company never got off the ground when the fund was formed in 2005.
"We're keeping those lines of business that make sense, even in workers' comp," Smith said. "We're exiting the part that didn't fit the company's mission, but we're beefing up the part that does."
The wind-down of business and the real estate equity fund write-off contributed in 2011 to Ullico Casualty Co.'s first net loss in the past five years. The company reported a net loss of $15.7 million, compared with a 2010 net income of $3.4 million, according to BestLink, A.M. Best's online financial system. However, in the past five years the company has seen a steady increase in its net premiums written, which was reported at $36.6 million in 2007 and $137.4 million in 2011.
Ullico Casualty Co. primarily writes workers' compensation, liability and commercial automobile, according to BestLink (www.ambest.com/bestlink). In 2010, just less than 65% of its direct premiums written were in three states: California, Illinois and New York.
Smith said going forward he is focusing on writing business that fits the mission of the company, which is to serve the labor market "and ask if we're the best in class." He said the company is also examining business lines to see which can be most profitable.
The full interview with Smith is available at http://www3.ambest.com/ambv/displaycontent/video.aspx?vid=smith512.