OHIO CASUALTY:
TURNING THE CORNER TO PROFITABILITY

A 20-point improvementin the personal lines combined ratio
is only one sign that things are better

By Dennis H. Pillsbury

Beth Riczko, FCAS, MAAA, CPCU, President of all insurance subsidiaries at Ohio Casualty; and Dan Carmichael, CPCU, President & CEO of Ohio Casualty.

It's been less than four years now for Dan Carmichael’s strategy for Ohio Casualty Group to take hold. Dan Carmichael, CPCU, is president and CEO of Ohio Casualty, which began to redefine itself as we entered the new millennium. As part of the strategy, the company reorganized into three major divisions—personal lines, standard commercial, and specialty commercial. At the time of the reorganization, personal lines showed a combined ratio of 115. Beth Riczko, FCAS, MAAA, CPCU, was placed in charge of the division. She has been with Ohio Casualty since 1992.

“Until I was named executive vice president and chief operating officer of personal lines (she was also senior vice president-finance), I had always been in a support role,” Beth says. “Overseeing personal lines let me be involved directly in the delivery of a strategy. My first task was to build a sense of ownership within the personal lines group—to build a team with a shared vision. It is great to see the results of our efforts as the company’s profitability improved.”

Dan notes: “Under Beth’s leadership, the personal lines combined ratio dropped 20 points. Our personal lines book closed the second quarter of 2004 at 95. She instituted pricing tools and withdrawals from 13 states where we had very little market share. Throughout the process, we communicated with our agents about what we were doing and why.”

As the saying goes, no good deed goes unpunished, and that was true with Beth. Her success in personal lines led to her recently being named president of all insurance subsidiaries at Ohio Casualty with supervisory responsibilities over underwriting and claims.

Beth explains, “Dan has a vision for the company. It’s my job to translate his vision into action at the divisional level.” There are two key parts to the strategy. One is to continue to bring down the expense ratio. The second is to improve the ease of doing business, both within the company and outside the company.

“Before Dan came in, it was very difficult to get anything done quickly. We had procedures that required signatures of nearly a dozen people before any action could be taken,” Beth remembers. “Now, the accountability rests with the leadership of each division, and we’re very fortunate to have strong staff in each division that are focused on delivering improved results.

“Everything we’ve implemented has been as a result of feedback from our agents. ‘Ease of doing business’ is defined by our agents, not by us.” — Beth Riczko

“Each division is focused on driving down the expense ratio and continuing to make it easier for agents to do business with us,” Beth says. “Another operational area is claims. Our claims handling must be quick, efficient and accurate. Claims service is what makes or breaks an insurance company and our claims leadership has seen to it that ours is exceptional.”

Beth admits that the new job is challenging, “But that’s what I like. I like the people. The culture here is fantastic. And now that we’re close to our target combined ratio, we’re focusing on growing the business. My job is to make certain that we grow prudently and profitably. We need to continue to share informa-tion across divisions to make certain we stay on the same page and learn from one another.

“It’s an interesting process,” she continues. “We continually track and monitor results. Being an actuary, measurement is something I actually enjoy doing. The biggest challenge for me personally is to find that balance between delegation and direction, to try to maintain the sense of camaraderie while instilling a sense of accountability. Fortunately, we have a great group of people who seem to thrive on hard work and believe in our strategy.

“Of course, it does help that we’re seeing the fruits of our labor,” she notes.

Dan picks up, “One of the keys to improving the ease of doing business for our agents is getting our technology to work. I hate to bring up that old warhorse—SEMCI—but we’ve actually put it into practice. We’re using XML data transfer tools so that agents just use their current agency management system to interface with us.”

Beth adds: “Everything we’ve implemented has been as a result of feedback from our agents. ‘Ease of doing business’ is defined by our agents, not by us. We listen to our agents, regularly hold agency council meetings, and deliver technology that they ask for, not what we think is best. One example of this is our guidelines for writing business. They were on six pages and agents pointed out how hard it was to find information. Now, they’re summarized on one easy-to-read page.

“Our focus is on listening to our agents. Our business is concentrated in a small number of states, which helps us get to know the agents better. We have enough scale to execute but are small enough to maintain a personal relationship with our agents.”

Dan adds that Ohio Casualty has “recommitted to independent agents and they have responded positively. The results for the first half of this year are the best this company has seen in 16 years. Our agents have been a great help in facilitating our efforts to reach our profitability goals. They understand that we are serious about doing business in a rational way and they continue to respond positively.

“I must admit that I am a little concerned about some indications that we have returned to a soft market,” Dan continues. “I think the added emphasis on reserve adequacy that is inherent in Sarbanes-Oxley should have the intended effect, to increase consistency in our industry’s year-to-year reserve position. But we are also prepared to take a hard stand. Our agents know that, while we want to help maintain our agents’ ability to compete in the current market, in order to maintain quality underwriting we have a walk-away price in every line, in every territory. We’ve come a long way and we’re not about to jeopardize our success by playing the pricing game. We are continually improving our service to our agents and their clients and that’s how we intend to win over the long term.” *