The assembled members of the business press, from London to Minneapolis-St. Paul to New York fumbled with notebooks and tape recorders, amidst the fine cutlery, to listen to the message, which was all about the textbook metamorphosis of this once-modest, though modestly successful Midwest organization into a global player.

I hear his message through the ears of my own 104-year-old company, which has reported on The St. Paul for much of its history, going back to its early years as a writer of fire and marine insurance for settlers of America's Northwest Territory.

Over time, the organization evolved into a principally personal lines writer, a strategy it exited some years ago, when it redeployed as the p-c only, commercial lines-only, worldwide niche player we see today.

It did so, Mr. Leatherdale suggests, because the personal lines picture no longer appeals, at least not to him. Five companies own 50 percent of the auto and homeowners market today, he says, with the rest of the pack competing for the other half almost solely on the basis of commodity pricing. Quite simply, the ones who come in the lowest, he says, will be the winners.

The pricing story at the new St. Paul, however, is a horse of a different color. There, significant upward movement across all lines of business has been the rule for three successive years now, says Mr. Leatherdale, unapologetically.

He says the organization is “growing quite rapidly,” having moved (successfully, by his lights) from an undifferentiated insurance operation to a highly-focused commercial carrier that has successfully diversified across 12 specialties “where we are dominant.”

A full 80 percent of St. Paul's business now emanates from these niches, while the remaining 20 percent is in standard p-c coverages managed on a global basis.

Besides the competitive edge it derives from deep underwriting and claims expertise in its specialty niches, Mr. Leatherdale says a company like his, “with its unquestioned financial strength,” stands to benefit greatly from the latest “flight to quality,” which has been fueled by a number of high-profile company failures of late in the United States, the United Kingdom, and Australia.

That and the fact the organization is “very outwardly focused on its customers,” says Mr. Leatherdale, which he says is in contrast to many of its competitors, which have been focused on corporate restructurings and other inner turmoil. In all, he says, 90 percent of St. Paul's business “is doing quite well.”

The other 10 percent involves medical malpractice and other healthcare business and “is undergoing some stress,” but, for the most part, remains sustainable on a long-term basis.

Medical malpractice, for example, is an area where St. Paul has built strong brand identification over the past 25 years or so. “We have more expertise than anyone, and we're not about to give up that franchise easily,” he says. “We've made a lot of money with it.”

The company is, however, raising rates substantially. The average July 1 increase was 20 percent and the range was 10 percent to 65 percent, he noted.

For hospital coverages, the picture is bleaker. Here, the company is raising rates dramatically, 103 percent on average, and limiting its exposures and retentions as well. Here, as in other lines, the St. Paul way is “to establish a timeframe for a strategy of 'doing it well' or shrinking and exiting,” says Mr. Leatherdale.

It's a strategy that also applies to the international side of the operation, where they do business exactly the same as they do here and consequently feel they have as much chance for success.

Briefing over, the cogs and wheels of Doug Leatherdale's well-oiled (and now well-fed) insurance machine pushed back from the breakfast table and headed out, some to the Northwest of its origins, but others to faraway places in the world that is its present and future.

Thomas J. Slattery is Executive Editor At Large. He can be reached at [email protected].

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, September 17, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.

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