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September 28, 1999
Lawrence S. Doyle, president and chief executive officer of Annuity & Life Re, said the 18-month-old provider of customized reinsurance products has managed to hire some highly knowledgeable people. Currently, the company has 11 employees--six of them actuaries--and is looking to hire more skilled personnel. Doyle spoke Tuesday at the life insurance segment of the CIBC World Markets conference, co-sponsored by A.M. Best Co. Doyle said another obstacle for start-ups is the less-than-enthusiastic view of rating agencies toward hedge-fund investments. "We visited that, too, with our excess capital in the beginning, and the rating agencies gave us a cold reception," Doyle said. His company maintains a conservative, blue-chip portfolio, he added. Doyle attributed the company's 35.2% growth rate to several factors: - Its low-expense structure, with a small number of employees. The business is run for $6 million a year, Doyle said. As a low-cost provider, it can offer "significant pricing advantages" to customers, Doyle said. - Its focus on life and annuity reinsurance only. - The competitive advantage of operating in Bermuda, with that country's tax advantages and favorable regulatory environment. These yield advantages over U.S.-based reinsurers in both underwriting profits and net operating income. - The company's refusal to participate in retrocessional pools. All underwriting is done by Annuity & Life Re's actuaries, Doyle said. "We are so conservative in not writing risky business--no pools, no associations, no morbidity-type exposure." Doyle said the only exposure the company has on its annuity business is 3%. "We have probably the least risk profile of any reinsurance business. The only risk to us is if long-term rates get down to 4%, and we get crunched on our spreads."
With 2.5% of the market, Annuity & Life Re ranks 13th in market share among the top life reinsurers. The company has $2 billion in assets, $381 million in capital and no debt, Doyle said. "We have 12 of the top 25 companies as clients right now, and we want to get more," he said. "We have 1.8 million lives on our books, and our average policy limit is $17,500, because we participate on a co-insurance basis." |
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The main constraint in starting up a reinsurance company isn't
geographic or financial--it's acquiring the necessary expertise, the top
official of the new Bermuda-based Annuity & Life Re Holdings
said.