St. Anthony: Low-profile insurer starts to shine

  • Article by: NEAL ST. ANTHONY , Star Tribune
  • Updated: November 4, 2012 - 9:36 PM

Mike Miller, One Beacon Ins. Group

A Minnetonka-based insurer is slowly emerging as one of Minnesota's financial beacons.

Low-profile is just the way T. Michael "Mike" Miller, CEO of OneBeacon Insurance Group, planned it.

"We're proud to tell our story," Miller said last week. "Our goal is to be a good company and to be good corporate citizens. But without fanfare."

Miller, a former St. Paul Travelers executive, is developing a pretty good story.

OneBeacon has evolved over the past decade from a small money-losing, Boston-based property-casualty insurer with revenue of about $3.2 billion and 6,000 employees to a leaner, profitable specialty-lines commercial insurer that will post revenue of about $1.2 billion this year.

Today OneBeacon employs about 1,100 people around the country.

"We're not focused on size," Miller said. "We're focused on profitability."

Miller, 53, put off a several-month interview request until third-quarter results were booked last week and the company had announced the pending sale of the last of its legacy operations to an affiliate of Armour Group Holdings. OneBeacon booked a third-quarter noncash charge of $101 million on a transaction that will cover liabilities going back dozens of years and which is expected to close in 2013.

The company also reported a $111 million profit from continuing operation on revenue of $945 million for the first nine months of 2012. OneBeacon, trading around $13 per share, has a market value of about $1.25 billion.

OneBeacon was started in 2001 by insurance legend Jack Byrne, now in his 80s and retired, and his protege, Ray Barrette. Byrne was recruited to Geico in 1976, which was on the brink of insolvency. He turned it around and Geico eventually was acquired by Warren Buffett's Berkshire Hathaway. Byrne and Buffett also made insurance history profitably with the acquisition, turnaround, public stock offering and 1991 sale of Fireman's Fund Insurance.

The Oracle of Omaha dubbed Byrne "the Babe Ruth of Insurance."

Byrne took the remnants of Fireman's Fund, after its 1991 sale to huge Allianz Group of Germany, and started New Hampshire-based White Mountains.

Byrne and Barrette, a former insurance consultant and Fireman's personal-lines executive, acquired the money-losing businesses of Commercial Union and General Accident at a big discount in 2001. They have $300 million in financial backing from Berkshire Hathaway.

Barrette, the CEO of White Mountains, started the process of selling weak businesses and starting specialty businesses insuring inland boats, doctors, lawyers, media, local governments and what has become 12 diverse specialty businesses around the land since Miller joined the company in 2005.

In 2006, White Mountains, which still owns 75 percent of OneBeacon, spun it off as a stand-alone public company.

Miller, who spent 10 years at the St. Paul before its acquisition by Travelers in 2003, was recruited by Barrette to focus OneBeacon as a high-margin specialty-business underwriter.

"I was impressed by [Byrne and Barrette's] clarity and the simplicity of their view," recalled Miller, once co-chief operating officer of the combined St. Paul Travelers, which today is run from New York. "It took me several meetings to believe them."

Insurers generally get in trouble during lean times by writing too much business too cheaply. And small insurers can get crushed competing for mainstream property-casualty business with the huge likes of Travelers and Fireman's Fund.

Seeing growth ahead

In 2006, Miller, who has recruited a couple of other OneBeacon executives from St. Paul Travelers, moved the Bermuda-domiciled company to Minnesota, his home. He started with one other employee, his assistant. Now OneBeacon has about 55 Minnetonka-based employees in leased space on Carlson Parkway.

There are about 300 employees still in Boston. But the Boston-based businesses have been sold. And Miller expects Minnetonka, where a couple of the specialty insurance businesses are based, to grow to 125 people over the next few years.

"We're building out a corporate finance department here," said Miller, who earned a $1.5 million bonus last year on top of a $500,000 salary. "And the operating businesses are wherever they need to be."

Staff writer Patrick Kennedy contributed to this report.

Neal St. Anthony • 612-673-7144 • nstanthony@startribune.com

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