"We are pleased that we can now go forward with the integration of Farmers Business Insurance and Zurich Small Business Solutions,” said Paul Hopkins, chief executive officer of Farmers Group, Inc. “It will enhance the depth and breadth of products available to customers, create an enhanced distribution capability that competes even more effectively in both the exclusive agent and independent agent channels, and will benefit our entire organization."
The SBS book consists of four primary lines of business: business owner's policy (BOP) for property, general liability and umbrella, commercial auto and workers' compensation — and is sold in 49 states plus the District of Columbia.
Although the management of the SBS book will shift to Farmers immediately, the full transition of the business to Farmers Business Insurance is estimated to occur within 18-to-24 months.
In the interim, Zurich companies that underwrite the SBS book and the Exchange will enter into a reinsurance arrangement, through which SBS premium will continue to be written on its current paper, but fully ceded to the Exchange. Other terms of the proposed transaction were not disclosed.
In 2007, Farmers Small Business Insurance unit produced $1.6 billion in gross written premium. This transaction will make the Exchange one of the top-five carriers in the U.S. small business market. The SBS book is estimated at approximately $700 million.
Mhayse Samalya, president of Farmers Business Insurance, added, “The economics of the small commercial business and the increasing level of sophistication and investment needed to do everything from predictive analytics, new product development, building state-of-the-art automation capabilities while at the same time continuing to implement processing efficiencies, makes winning in small commercial a game of scale.” Samalya added, “At $2.3B of small commercial, we now have that scale. Our goal is to leverage our size and substantial resources into a regional field based model that seeks to solve problems for agents.”
Samalya noted to better serve the thousands of Independent agents that currently offer SBS products, Farmers has appointed Carl Hackling as the new leader of the small commercial business distributed through independent agents. Samalya noted that Hackling will be field based and will immediately assume all responsibility for the distribution and underwriting of this business.
Jerry Carnahan, EVP of Exclusive Agency Field Operations, remarked, “This transaction will result in significant investments that will also help our Farmers Agents win with customer focused products and industry leading systems.” He further stated that the field-based strategy is perfectly suited to support our local agents that provide advice and service in the communities that we serve.