Hagedorn & Co.: Better Brokers - American Executive - RedCoat Publishing - American Executive

Hagedorn & Co.: Better Brokers

Insurance

Written by John Zorabedian

Tuesday, 01 April 2008

Hagedorn & Co.: Better Brokers - American Executive - RedCoat Publishing

In a soft insurance market, Dan Gabel and Ken Sciara tell us how this brokerage firm is weathering Wall Street’s woes.

Premier Business Partners:

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Wall Street couldn’t hide its collective grin when New York Governor Eliot Spitzer resigned in disgrace last month, but not everyone was so gleeful. Dan Gabel, chairman and CEO of the New York insurance brokerage Hagedorn & Co., said Spitzer’s actions as attorney general of the state helped tame the big brokerage companies to give smaller firms like his a more level playing field.

Dan Gabel, chairman and CEO

But Gabel, the fifth generation of his family that has owned Hagedorn since 1869, said that competition among insurance companies for premium volume is driving down premiums and making it more difficult for insurance brokerage firms to maintain a reasonable profit margin. Increased competition among insurance carriers has been caused by Wall Street hedge funds investing in these companies, and the fact that there have been fewer hurricane and natural disaster losses in recent years.

One area of business that is picking up this year: directors’ and officers’ liability insurance. As the big banks and brokers on Wall Street have taken hit after hit from the mortgage meltdown that has sent the economy to the brink of a recession, shareholder lawsuits are driving up the price of coverage for financial institutions’ corporate executives and board members.

“We have had several years of decline in the pricing and a 14% reduction in premiums on average in 2007,” Gabel said. “Some policies are starting to rise again for various reasons—some financial companies are being sued. The big banks weren’t minding the investors’ money very well.”

Hagedorn has a wide range of clients for commercial, real estate, workers’ compensation, and marine shipments policies. Many Hagedorn clients are growing as their businesses become more successful. Their need for additional insurance and risk management services is an opportunity for Hagedorn’s professional staff to help them and strengthen the long term relationships they have with the firm.

The company’s typical client is a mid-sized business, primarily in New York or the tri-state area, as well as hospitals, law schools, and universities. Its marine clients are based around the world. The company originally provided coverage for shipments of cotton in the late 19th century, and now Hagedorn covers a lot of shipments of cocoa and coffee from South America.

Acquisition opportunity
The down market has created opportunities for a company like Hagedorn, which is still financially sound. The company recently acquired SRJV Risk Services, which specializes in serving Japanese clients with operations in the US. They also have expertise in serving real estate accounts.

Ken Sciara, President

“It’s a growth area for us; it’s a nice niche,” said Ken Sciara, president. “Hagedorn has a history of doing business with Japanese companies going back to the 1800s, mainly through cotton.” The employees of SRJV (now a division of Hagedorn) will help build relationships with Japanese clients for Hagedorn, as well as grow other aspects of Hagedorn’s business, he said.

“The softness in the market is a pressure, but not overly concerning to us,” Sciara said. “We feel that even though it’s a pressure we have, all of our competitors have the same pressure. Sometimes a down market can be a time of opportunity. There may be some weaker companies that can be made stronger by joining us, so we’re actively seeking small acquisitions.”

Gabel said competitors have approached him about selling Hagedorn, but he is not interested in selling his family’s business. Sciara said the strength of the company’s client base and reputation mean selling is not in the company’s plans. “The whole focus of the company is on the client,” Sciara said. “We’re fortunate in a couple of respects. Even in this market, Hagedorn is financially sound. There is no pressure to sell the company, and there’s no pressure to downsize to the point where the customer suffers. The customer comes first, and that is the key to our successful business.”

One of Sciara’s main roles as president and COO has been to build the sales team at Hagedorn and to generate new business from customer referrals. Finding new talent and training new brokers is a major challenge for the company, and as the newly elected president of the Insurance Brokers Association of New York, Gabel said he wants the association to focus on training and recruitment.

“We have a problem finding talent in the insurance company and the broker side right now,” Gabel said. “That’s one of the areas the brokers association is starting to address.”

Gabel and Sciara encourage all of the professionals at Hagedorn to provide exceptional service to their clients. “We lead by example and follow the traditions that have made Hagedorn a great company since 1869,” Sciara said. The cover of the company’s most recent client brochure clarifies this approach: “We operate with a sense of urgency and the motivation to deliver the best results for our clients.”

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