GR presents its 2009 list of the most influential people in reinsurance. Influence, never an easy quality to quantify, can come from leadership of an important company – or from simply being good at what you do.
Perhaps the most striking change this year is Stefan Lippe’s entry at number three. He took over at Swiss Re from Jacques Aigrain, who was punished for the company’s foray into investment banking. Another high new entry is Ulrich Wallin at number 11, who this year took the helm at Hannover Re from the retiring Willi Zeller.
Greg Case leaps 19 places to fourth, as his vision for Aon takes hold. Also racing up the rankings is Patrick Thiele, who jumps from 18th to seventh, after PartnerRe’s acquisition of Paris Re. Ed Noonan (up from 32nd to 15th) is another whose standing has increased markedly after a takeover.
> Last year’s positions are shown in brackets
1(1) Warren Buffett CEO, Berkshire Hathaway
Billions made and lost; still going strong at 78
The 78-year-old Sage of Omaha has had a mixed year. On the plus side, he made significant investments in both Goldman Sachs and Swiss Re at bargain prices. Against that, he was hurt by the vacillations of stock markets.
Again on the plus side, a billion-dollar bet on ConocoPhillips looks like making good money, but statistics show that Nebraska-based Berkshire Hathaway has underperformed in the past 15 years in comparison to Power Corp and its owner Paul Desmarais, making Buffett only the second greatest investor in the years since 1994.
Yet, again on the plus side, in September last year Berkshire bought 225m new shares in BYD, a Chinese electric car maker. The stock jumped five-fold in the weeks after the deal was announced, earning Berkshire a $1bn profit. Disappointingly, a biography by Alice Schroeder, to whom Buffett gave unprecedented access, was easily outsold by the story of a younger wizard, Harry Potter.
Everything about Buffett and Berkshire is a contradiction. In 2008, for example, the net worth of the company decreased by $11.5bn, reducing the per-share book value by 9.6%. But take a longer view and the picture reverses: over the 44 years that Buffett has been in charge, book value has grown from $19 to $70,530, an annual growth rate of 20.3%.
Sometimes, Buffett can be accused of over-adherence to his own rules. For instance, his basic philosophy of stock ownership is never to sell. Those who got out when the Dow topped 14,000 must be considered better short-term investment managers. Whether they’ll be reporting 20% annual gains for the next 43 years remains to be seen.
Not entirely inflexible, Buffett has changed his views from time to time. In the early days, Berkshire focused on long-term (that is, permanent) investments in publicly quoted stocks, but lately he has been buying companies whole. Having $40bn in spare change obviously affects your thinking.
Everyone knows of Buffett’s pre-eminence in the folk wisdom department. He still lives in the house he bought in 1958, plays the ukelele at AGMs, etc. Heretical though it may be, would it be wrong to ask why a man would make a meaningful percentage of a trillion dollars and not let it affect him? Where’s the fun in that?
Buffett’s recipe for success
Berkshire pins its success on four main principles:
1) maintaining its “Gibraltar-like financial position”, which features huge amounts of excess liquidity, modest near-term obligations and dozens of sources of earnings and cashflow (assets at 31 March 2009 exceeded $260bn);
2) widening the “moats” around its operating businesses to give it durable competitive advantages;
3) acquiring and developing new and varied streams of earnings; and
4) expanding and nurturing the company’s cadre of operating managers.
Berkshire’s insurance interests
Berkshire is a holding company with subsidiaries that engage in diverse business activities including property and casualty insurance and reinsurance, utilities and energy, finance, manufacturing, services and retailing. In its insurance portfolio are:
• GEICO, the third largest auto insurer in the US, which Berkshire acquired in 1996;
• General Re (bought in 1998), one of the largest reinsurers in the world based on net premiums written and capital, which consists principally of Cologne Re and the Faraday companies, as well as life/health reinsurance activities;
• the Berkshire Hathaway Reinsurance Group;
• NRG (Nederlandse Reassurantie Groep), a Dutch life reinsurance company, acquired from ING in December 2007;
• Berkshire Hathaway Assurance, a financial guarantor that insures municipal and state bonds that finance public works; and
• other subsidiaries that underwrite property and casualty insurance, including National Indemnity, Medical Protective, Applied Underwriters, US Liability Insurance, Central States Indemnity, Kansas Bankers Surety, Cypress Insurance, BoatUS and other subsidiaries referred to as the “homestate companies”.
2(3) Dr Nikolaus von Bomhard Chairman, Munich Re
Like many successful leaders, von Bomhard knows the importance of surrounding himself with good people. He avoids hogging the limelight, either in a conscious effort to avoid becoming “Mr Munich Re” or simply because he trusts other senior members to do their job. Understated at the best of times, he revealed the German giant had turned a profit of €1.5bn in 2008 despite the global financial meltdown
A private individual, the
53-year-old enjoys long-distance running, skiing, golf and classical music. He worked his way up through the company since joining its graduate trainee programme in 1985. He was a fire treaty underwriter before taking up a post in Brazil in 1997. He joined the board of management in 2000, becoming chairman in 2004.
The company’s Changing
Gear programme will surely be von Bomhard’s main legacy. Introduced in 2007, the expansion and restructuring initiatives have continued with the acquisition of Hartford Steam Boiler from AIG. More purchases could be on the cards for 2009. “Munich Re is in good financial shape and can exploit opportunities in the market,” he says.
3(–) Stefan Lippe CEO, Swiss Re NEW ENTRY
Stefan Lippe has not been in the top job for long. But he deserves his high spot on our list for taking on the biggest leadership challenge of the year, and for quickly establishing control. Lippe, 53, took the reins from Jacques Aigrain in February, after massive losses wiped out a third of Swiss Re’s market value in a week.
“Back to basics” is Lippe’s pledge for the future. Unlike his predecessor, he has a background in reinsurance having begun his career at Bavarian Re in 1983, working his way up to his election as chairman in 1993. He became a member of Swiss Re’s executive board in 1995 as head of Bavarian Re, and was appointed head of the property and casualty business in 2001. In 2008 he became chief operating officer and deputy CEO.
Lippe often stresses his belief in relationships and communication. He dines in the company’s canteen and encourages staff to email him with their thoughts and advice. While he is “clear about the challenges that Swiss Re needs to address”, it is also clear that he is not about to swing too far in the other direction in an effort to get the reinsurer back on course.
Swiss Re’s problems stemmed from its financial products. Capital was depleted by full year mark-to-market losses of CHF6bn in its financial markets division, including CHF2bn from structured credit default swaps.
Under Lippe’s watch, financial markets has been disbanded and the reinsurer is getting back to reinsurance basics, which early signs suggest is paying off. First quarter results for 2009 beat analysts’ expectations.
Despite the changes, Lippe does not want Swiss Re to lose its pioneering spirit. Although he has stressed “back to basics” that does not mean “going back to the Stone Age,”?he said recently. “We were always an innovator and that won’t change.”
4(23) Greg Case President and CEO, Aon Corporation
Plucked from relative obscurity to lead the global brokerage firm out of its difficult post-Spitzer meltdown in 2005,
Greg Case’s profile has been steadily growing.
He is a McKinsey man who surprised analysts by snaring the top job at Aon as he was appointed with no corporate management experience. But during his tenure there has been a mood-shift in the company, and he is now flanked by a team of young executives that look the insurance version of Reservoir Dogs, dressed in Armani suits and twinkling smiles. Their enthusiasm is difficult to ignore – even in these trying times.
The 46-year-old also oversaw the purchase of rival broker Benfield which took Aon to the top of the reinsurance brokerage pile. The deal gave Aon a much bigger presence in key P&C markets such as Florida, where Benfield had built up its presence over many years. Aon also provided the best information during the AIG crisis.
Since joining Aon, Case has met about 100 clients a month and more than 30,000 of Aon’s staff around the world.
5(8) Brian Duperreault President and CEO, Marsh & McLennan Companies
Now 62, Brian Duperreault came out of retirement to guide MMC out of the dark days post-Spitzer just as the recession was hitting. In a rollercoaster 18 months, he has set improving performance and morale as his main goals. Though his success has been dampened by the recession, he has achieved a lot in a short time. Last year, Marsh’s profitability rose and there has been increased new business production and improved client revenue retention. Guy Carpenter is doing much better with Peter Zaffino at the helm. Despite difficult times, Mercer and Oliver Wyman appear to be managed well with a tight grip on costs, and Kroll, which has been a thorn in the side of Marsh, has a new boss.
Duperreault earned his spurs by transforming Ace, as its chairman and CEO from 1994 to 2004, from a relative minnow to a global giant. He started his career with AIG and was a favourite of Hank Greenberg.
To relax, he collects antique maps and still commutes (when he can) back to his home in Bermuda.
6(6) Ajit Jain President, Berkshire Hathaway Reinsurance Group
“Ajit came to Berkshire in 1986. Very quickly, I realised that we had acquired an extraordinary talent. So I did the logical thing: I wrote his parents in New Delhi and asked if they had another one like him at home. Of course, I knew the answer…there isn’t anyone like Ajit.” So says Jain’s boss and mentor Warren Buffett.
Jain, 58, is admired for his calculated risk-taking and, in Buffett’s words, avoiding “foolish losses”. He takes the risks that others avoid, such as insuring Chicago’s Sears Tower (now Willis Tower) in the aftermath of 9/11, when such trophy buildings were considered too risky.
Unsurprisingly, his name is often mentioned during the constant speculation surrounding Buffett’s succession plans. In his 2008 report, Buffett credits him with the company’s $58.5bn insurance “float” and a healthy performance despite a tough year.
Yet Jain nearly missed out on his big opportunity. Content to settle in India, his wife convinced him to move back to the US in the early 1980s, where he pursued a career at McKinsey before joining Berkshire.
7(18) Patrick Thiele President and CEO, PartnerRe
Move over Kessler, there’s a new European king in town! PartnerRe’s decision to acquire Paris Re in a $2bn deal rivals the Scor/Converium marriage of two years ago. In Thiele’s ninth year at the helm, this latest acquisition completes the once strictly property cat reinsurer’s transition into a diversified global force. The combined companies are expected to produce the world’s fourth-largest reinsurer, bringing shareholders’ equity to about $6bn. “This is an important acquisition for PartnerRe and provides us the opportunity to enhance our already successful franchise,” says the 58-year-old Thiele, known for his calm and steady leadership.
Thiele has guided the reinsurer through some of the industry’s biggest challenges, including 9/11 and Hurricane Katrina, which brought the company losses of $347m and $511m respectively. The push to diversify away from US catastrophe seems to have paid off; the reinsurer is one of the three surviving members of the Class of 1993 and the only one to outgrow its catastrophe-only background. Last year it revealed a full year net income of $46.6m.
8(11) Evan Greenberg Chairman, President and CEO, Ace
Warm and fuzzy he ain’t. But no one doubts that Evan Greenberg is really, really good at what he does.
As the son of Hank Greenberg, he may be genetically hardwired to be successful in this business, but just look at how well he has steered Ace since taking over as President and CEO in 2004 from Brian Duperreault and how steady he has kept the ship during the economic crisis with the company’s performance described by analysts as “solid”.
The 54-year-old caused more than a few ripples in Bermuda by moving the corporate headquarters to Zurich, but recently Greenberg has been focused on trying to gain customers and says the company is well positioned to build market share as insurance markets improve and economic growth recovers.
Greenberg arrived in 2001 to head up Ace Tempest Re.
Before that he was chief operating officer of AIG, where his father was grooming him to take over the business – but sons famously don’t do their father’s bidding and there was a fall-out.
9(5) Joe Plumeri Chairman and CEO, Willis Group
New Jersey-born Joseph J Plumeri has become something of a cult figure – one part CEO and the rest pure celebrity. Since joining Willis as chairman and CEO in 2001 (after a 32-year career at Citigroup), the straight-talking 65-year-old boss has led Willis through some of the insurance and broking sector’s toughest tests, including the 9/11 attacks and Eliot Spitzer’s investigations.
Among his successes is shaking up one of the industry’s oldest institutions and bringing it through a period of restructuring. Organic grown and strategic acquisitions have culminated in the $2.1bn acquisition of Hilb Rogal & Hobbs. Plumeri remains an outspoken proponent of transparency in the broking sector and sees the financial crisis as an opportunity for the industry as a whole.
Joe wouldn’t be Joe without a bit of razzmatazz. Having last year opened the Willis Building at 51 Lime Street, London’s newest and shiniest skyscraper, this year the “Willis Tower”, once the Sears Tower, was officially unveiled in Chicago.
10(4) Lord Levene Chairman, Lloyd’s
Lord Levene of Portsoken is one of the most recognisable and respected figures in the insurance and reinsurance world. The once Lord Mayor of London is so much a part of the London insurance market that it seems incredible to think he has only been chairman at Lloyd’s since 2002. Accomplished in business with a long and varied career, he has quickly identified the issues in insurance that need fighting for.
And fight he does – against unfair tax and anti-competitiveness, to push climate change up the agenda and, most recently, to protect Lloyd’s and the insurance sector from being punished for the excesses perpetrated in banking.
Speaking frankly – and the 67-year-old Levene only ever speaks frankly – to Bloomberg following this year’s G20 meeting in London, he said: “The banks have got serious problems but the rest of the financial services industry is in good shape.
Our relations with our regulator are very good and I hope it’s going to be a situation of ‘if it ain’t broke don’t fix it’.”