Lehman/A.M. Best Co. 2nd Annual Conference

"We think workers' comp is a work in progress, and we just don't think it's there yet."
Stephen Way
Chairman & Chief Executive Officer
HCC Insurance Holdings

HCC's Way: Selective Acquisitions Can Strengthen

HCC Insurance Holdings is like a discriminating shopper in a mega mall. "We're not a buyer of companies that need fixing up," said Stephen Way, chairman and chief executive officer of the Houston-based insurance holding company.

Speaking during the second annual Insurance Conference held in New York May 21 and 22, cosponsored by Lehman Bros. and A.M. Best Co., Way said HCC's acquisition strategy includes adding new lines of business and expanding existing lines. The company sells medical stop-loss, group life, aviation, accident and health, marine and offshore energy, workers' compensation and property insurance. HCC's largest line is medical stop-loss, with $450 million in annual premiums.

Over the years, HCC has acquired insurance carriers, brokers and underwriting agents. "We've really looked at the entire food chain and picked some areas where we can make money," Way said.

When HCC seeks companies to acquire, it looks for companies with strong management, Way said.

HCC acquired Schanen Consulting Corp. in January. In 1999, HCC acquired PEPYS Holdings Ltd. and the Centris Group Inc.

"The best deals that we've ever made are with companies that aren't for sale," Way said.

Could the tables be turned and HCC become a potential acquisition target. "We're a public company; you can buy one share or all of them," Way said.

Way said HCC's workers' compensation business is small, because the reserves can't be trusted. "We think workers' comp is a work in progress, and we just don't think it's there yet," he said. "It's a $15 billion industry. The minute it gets to $25 billion, I think we're going to be a player," he said.

(By David Hilgen, editor, Best's Review: David.Hilgen@ambest.com)