The Swett & Crawford Group Inc.

views updated

The Swett & Crawford Group Inc.

21650 Oxnard Street, Suite 1400
Woodland Hills, California 91367-4940
U.S.A.
Telephone: (818) 593-2008
Fax: (818) 593-2084
Web site: http://www.swett.com

Private Company
Incorporated: 1914 as W.B. Swett & Company
Employees: 850
Total Assets: $3 billion (2005)
NAIC: 524210 Insurance Agencies and Brokerages

The Swett & Crawford Group, Inc., is the United States' largest and oldest wholesale insurance broker, serving as an intermediary between insurance carriers and independent agents. The firm represents leading standard and specialty insurance carriers in the world, 200 in all, providing over 14,000 retail agents and brokers with products tailored to serve specific industries, such as agriculture, biotechnology, energy, construction, transportation, healthcare, casinos, and entertainment. Some 40 offices are maintained in the United States and the United Kingdom. Privately owned by Hicks, Muse, Tate & Furst since late 2005, Swett & Crawford announced plans to move its headquarters to Atlanta, Georgia, after more than 80 years of being based in the Los Angeles area.

AGENCY FORMED: 1914

The men behind the Swett and Crawford names were Los Angeles attorney Clarence H. Crawford and San Francisco underwriter W. B. Swett. In 1908 Crawford moved to San Francisco to run Pacific Surety Company. When the business faltered, he hired Swett in 1913 to help him sell the assets. A year later they went into business together, forming a San Francisco-based insurance agency called W. B. Swett & Company, a name that would be kept until 1926 and Swett & Crawford was adopted. The firm initially served as the managing general agent for a Los Angeles insurer, Indemnify Company, which focused on the surety and plate glass industries. At the behest of Swett & Crawford in 1915, Indemnify Company expanded its business to include automobile insurance, a product with rising demand as Henry Ford's affordable Model T began selling to the masses.

The 1920s were a time of growth and diversification for Swett & Crawford. It struck out on its own in 1921, forming Security Insurance Company of California and acting as the managing agent for the subsidiary, which in addition to automobile insurance offered personal, homeowner, and other small casualty insurance policies. Swett & Crawford added more responsibilities in 1925 when it became the sole underwriting manager for Pacific Indemnity Company, a new Los Angeles-based company. Subsequently, Pacific Indemnity Company and Security Insurance Company were merged and reorganized. By the end of the decade Swett & Crawford had opened a second office, located in Los Angeles.

Despite the Great Depression, Swett & Crawford continued to expand in the 1930s, emerging as the largest insurance agency on the West Coast, according to trade publication Underwriter's Report. Branch offices were opened in Seattle and Portland in 1931, and three years later the firm established its Excess and Special Hazards Department to write high-risk insurance policies, focusing on two of California's most significant industries, motion pictures and aviation. The unit, which because it served as a broker for Lloyd's of London became known as the Lloyd's Department, also provided coverage for major construction projects, such as the Golden Gate Bridge, the Oakland Bay Bridge, the Hoover Dam, and San Francisco's Mark Hopkins Hotel. Swett & Crawford's other Lloyd's business during the 1930s included an accident and life insurance policy for Will Rogers, who ultimately died in a plane crash in Alaska. The firm also provided Universal Studios with riot and strike coverage during a tumultuous time for the film industry in the mid-1930s, wrote cast insurance for Disney's Snow White and the Seven Dwarfs, and provided producer David O. Selznick with coverage that included indemnity, cast, and negative film insurance for Gone with the Wind.

POSTWAR SHIFT IN DIRECTION

Swett & Crawford continued its connection to Hollywood in the 1940s, selling insurance to such stars as Bing Crosby, Lucille Ball, and Marlene Dietrich. The first half of the decade was dominated by the war effort, however, as the United States focused its economic resources on fighting World War II. Hence, construction work was put on hold and Swett & Crawford looked to new opportunities with defense contractors and aviation companies serving as subcontractors, including the likes of Lockheed and McDonnell Douglas. After the war ended in 1945 and the United States endured a brief recession, Swett & Crawford continued to pursue new lines of business as the United States in the postwar era embarked on an unprecedented period of economic growth. The firm was writing hull coverage for Lock-heed's new passenger aircraft, hydroelectric dams that were being constructed to meet the escalating demand for electricity in the United States, new factories constructed in response to the expanding economy, and policies written for the offshore oil drilling activity that was taking place in Southern California.

Swett & Crawford expanded its geographic scope in 1956, opening offices in Atlanta, Dallas, and Phoenix. The 1950s was also a period of transition in ownership as the two founders, after running the business for 40 years, were ready to retire. In early 1957 Crawford and Swett sold the business to the firm's 160 staff members through a stock acquisition plan. Upon completion of the transfer, Crawford stepped down as president and director, and Swett resigned as vice president, general manager, and director. Los Angeles-based John H. Archer took over as president. Other changes soon followed. In 1958 Pacific Indemnity reacquired its underwriting contract with Swett & Crawford. As well, some of the personnel in the Lloyd's Department broke away to form their own company to concentrate on surplus lines.

Through most of the 1960s Swett & Crawford remained employee owned. It was also during this period, in 1960, that the firm reestablished itself as a general insurance agent by acquiring Los Angeles-based Harbor Insurance Company. Moreover, Swett & Crawford was able to mitigate some risk by having Harbor underwrite some of its coverage. Swett & Crawford closed the decade by opening a Chicago office to oversee the firm's business in the Midwest. Ownership also changed hands in April 1969 when Swett & Crawford was acquired for about $13.5 million in stock by Unionamerica, Inc.

COMPANY PERSPECTIVES

Swett & Crawford's exceptional sense and knowledge of the marketplace—derived from the market conditions, savvy and technical expertise of our top-flight brokers and underwriters—enhances our value to both the retail agent and carrier alike. Our goal is to help agents and brokers serve their clients and take advantage of new revenue streams and business opportunities.

Unionamerica's California roots reached back to the late 19th century. Years before the film and aviation industries came to dominate the area, Southern California was home to millions of sheep. A wool merchant named Kaspare Cohn began acting as an informal bank for the shepherds he worked with, at first simply safeguarding the money they realized from wool sales and later providing them with loans. Under pressure from the California Banking Department, he ultimately formed the Kaspare Cohn Commercial & Savings Bank in 1914. Four years late the name was changed to Union Bank & Trust Company of Los Angeles. It operated as a single-branch bank until 1957 when it acquired Occidental Savings & Commercial Bank and picked up three branches in the San Fernando Valley. The name was subsequently shortened to Union Bank. By 1967, the bank, boasting assets of more than $1.25 billion, had grown to 15 branches. It became the first major bank to create a one-bank-holding company, a concept that would have a dramatic impact on the future of the entire banking industry. The holding company took the name Union Bankcorp, which in 1969 was changed to Unionamerica, Inc. The holding company arrangement allowed Unionamerica to diversify into a number of financial services. For example, the day after it was formed Union Bank acquired Western Mortgage Corporation, which served as the mortgage loan correspondent for Metropolitan Life Insurance Company, making it one of America's top mortgage firms. The addition of Swett & Crawford, along with the Harbor Insurance subsidiary, was part of this diversification effort.

Under Unionamerica's ownership, Swett & Crawford took advantage of its parent company's deep pockets to expand. In 1970 it formed a unit that took the name Unionamerica Reinsurance Company by acquiring an inactive New York firm, Buffalo Insurance Company, to become involved in treaty and facultative reinsurance. A year later Swett & Crawford turned its attention overseas, organizing a pair of ventures in London: Unionamerica Insurance Company Ltd. of Great Britain and Unionamerica Management Company Ltd. In the United States in 1973, Swett & Crawford formed Reinsurance Facilities Corporation (RFC). The firm also bolstered its Midwest business by opening offices in Columbus, Ohio, and Kansas City, Missouri. Two years later it moved into Canada, establishing Swett Insurance Agency, Ltd., based in Toronto.

COMPANY SOLD: 1976

Ownership of Swett & Crawford and its subsidiaries once again changed on the last day of 1976 when it was acquired by the New York-based Continental Insurance Corporation at a cost of $428 million in cash. In addition, Continental increased Harbor Insurance's capitalization by another $25 million. Continental was another venerable firm, its origins reaching back to the mid-1850s. In the 20th century, Continental became involved in the fire insurance field and over the decades expanded through acquisitions. Following the addition of Fireman's Insurance Company of Newark in 1957 the company adopted the American Fore Loyalty Group name. Five years later it became known as Continental Insurance Companies. A holding company, Continental Corporation, was created in 1966 to house a host of acquisitions. In the 1970s Continental expanded internationally, moving into such markets as Latin America, France, Germany, and Japan. Yet it also sought domestic growth, hence the acquisition of Swett & Crawford. In 1977 the new unit was named Swett & Crawford group, which included the original Swett & Crawford, Harbor Insurance, Buffalo reinsurance, and RFC. It prospered immediately, enjoying the best year in its history in 1977.

Continental's ownership of Swett & Crawford lasted only seven years. The most important advancement for the firm during this time was the formation of Swett & Crawford Management Company, Inc., a subsidiary that acted as the exclusive underwriting manager for Harbor Insurance. In 1983 Continental elected to refocus its operations and put the wholesale insurance assets on the block. St. Paul Companies bought the Swett & Crawford unit along with Swett & Crawford Management Co., and RFC, but Continental retained Harbor Insurance and the Pacific Insurance Company.

St. Paul was yet another company with a long history, tracing its origins to 1853 when the secretary of the Minnesota Territory, Alexander Wilkin convinced a local banker to help him start a company to provide fire insurance, leading to the incorporation of the St. Paul Mutual Insurance Company. In 1865 the name changed to St. Paul Fire and Marine Insurance Company. It would be one of more than 200 insurers impacted by the Great Chicago Fire of 1871. The company's resources were strained to the breaking point, but it paid all of its claims and gained a solid reputation in the process that would be a key element of the firm's success. A similar dynamic took place following the San Francisco earthquake of 1906 when St. Paul paid more than $1.2 million in claims.

KEY DATES

1914:: Company founded as W.B. Swett & Company.
1926:: The Swett & Crawford name is adopted.
1957:: Founders sell business to employees.
1969:: Unionamerica, Inc., acquires company.
1976:: Continental Insurance Corporation acquires company.
1983:: St. Paul Companies acquires Swett & Crawford.
1997:: Aon Corporation acquires Swett & Crawford.
2005:: An investment group takes Swett & Crawford private.

Over the course of the 1900s the firm added automobile insurance, aircraft insurance, and surety bonds, and founded St. Paul Mercury Indemnity Company to write liability coverage. Life insurance followed in 1957 with the acquisition of Western Life Insurance Company of Helena, Montana. General agencies were also added, leading to the 1968 reorganization that resulted in St. Paul Fire and Marine Insurance Company becoming The St. Paul Companies, Inc. While the firm looked to diversify into noninsurance fields, medical liability insurance became such a major business line over the next dozen years that St. Paul in 1980 began shedding noninsurance assets to refocus on insurance-related companies.

The addition of Swett & Crawford and RFC was part of a greater effort to build up a wholesale insurance operation. All of these wholesale assets would then be brought together in 1985 under the umbrella of Swett & Crawford Group name. A year later it was ranked the United States' leading wholesale brokerage by Business Insurance. Also in 1986 the unit grew further with the acquisition of a New England company, Fort Hill Insurance Agency. Another addition would follow before the decade ended, the 1988 purchase of London-based Minet Holdings PLC, an insurance brokerage. A subsidiary, Bowes & Company, was then consolidated into the Swett & Crawford operation, and the entire business became part of the Minet Group.

After celebrating its 75th anniversary, Swett & Crawford began the 1990s with further expansion, forming Swett Insurance Managers, which broadened the firm's underwriting activities. As business flourished, Swett & Crawford extended its product offerings, especially in construction and energy, and expanded its offices throughout the United States. However, increased competition adversely impacted pricing, then the United States was hard hit by a string of catastrophes in 1996 (Hurricane Fran, flooding throughout the West and Southwest, and an East Coast blizzard) that cost St. Paul more than $200 million. St. Paul once again shifted its emphasis, electing to beef up its small to midsized commercial underwriting business while unloading the Minet Group, including Swett & Crawford, to Chicago-based Aon Corporation in May 1997.

Aon was a fast-growing insurance company that had briefly enjoyed the distinction of being the world's largest insurance brokerage in 1996. The addition of the Minet Group helped to maintain that lead for a time longer, but Aon was soon eclipsed by Marsh & McLennan Cos. Nevertheless, Aon was generating an impressive $5.8 billion in annual sales from operations in some 80 countries. While Aon continued to pursue its international aspirations, Swett & Crawford took advantage of the synergies available with Aon's many assets to provide customers with greater services, which in turn led to increased business. The company also became involved in new areas, such as a reinsurance operation for energy-related risks for oil exploration companies and utilities. It also did well with a new line of earthquake insurance for homes valued at $1 million and above. The company also built up its business in the East and Southeast through the addition of the Bryson Associates' wholesale operations in 2000. As a result of these developments, in 2000 Swett & Crawford for the first time in its history topped the $1 billion mark in premium volume to more than $1.1 billion. Business was essentially split into the four areas of property, casualty, transportation, and professional liability, and 80 percent of the volume was sold through independent agents. Revenues continued to soar as Swett & Crawford topped $3 million in premiums written in 2003.

Aon sold Swett & Crawford in 2005 to an investor group headed by Hicks, Muse, Tate & Furst (now HM Capital Partners), along with Banc of America Capital Investors, Emerald Capital Group, and the firm's management. Under Aon's ownership, Swett & Crawford had operated under a long-term hiring freeze that hindered its ability to enjoy even greater growth. The new owners installed a new chief executive officer, Neil Abernathy, in 2006, and Swett & Crawford's headquarters was moved to Atlanta, where he lived. Abernathy had previously served as the firm's president and chief operating officer. Going forward the company planned to maintain its reputation for service and lift the hiring freeze to expand into new markets, such as Arizona, Florida, Nevada, and Tennessee. It was also possible that the company would look to more acquisitions to achieve that goal.

Ed Dinger