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

"Branding only works if you are able to raise prices." Mike Masterson President & Chief Executive Officer, Midland National Life Insurance Co.

Sammons Prefers Carving Out Niches to Taking on Giants

For a life insurer to achieve double-digit growth in today's competitive environment, the company must combine organic growth with the introduction of new products and strategic alliances, said Michael M. Masterson, president and chief executive officer, Sammons Financial Holdings.

Masterson spoke at the 2nd annual Insurance Conference in New York, co-sponsored by Lehman Bros. and A.M. Best Co.

With a projected $185 million in operating earnings this year, Sammons Financial Holdings, an insurance holding company, picks its battles carefully, carving out niches rather than trying to compete with the financial supermarkets.

Realizing it doesn't have the size to create scale in a large number of businesses, the company focuses narrowly on term, whole and universal life and annuities, Masterson said.

Segmenting the business further, Midland National Life Insurance Co. sells term, whole and universal life products through financial planners, while the group's other insurance company, North American Company for Life & Health Insurance of New York, distributes its term life and term universal life policies through brokers, financial institutions and the Internet.

Sammons Financial, a division of Sammons Enterprises Inc. of Dallas, minimizes operating costs in a similar manner, establishing a service center in Sioux Falls, S.D., for policy operations and other back-room functions such as the data center. The company's claims-management operation is consolidated in Chicago. "Expenses are a huge challenge," Masterson said.

Masterson said a company can determine whether it is succeeding based on several points:

-- Differentiation, the element that allows the company to outdo its competitors;

-- Fundamentals, how well a company manages risk, operating costs, investment performance and strategic implementation; and

-- Technological competence, the ability to manage legacy systems at a low cost while focusing on Web-enabled systems for new initiatives.

While smaller companies face competitive challenges, the bigger brand-name companies don't necessarily have clear sailing. "Branding only works if you are able to raise prices," Masterson said.

(By Marilyn Ostermiller, executive editor, ostermm@ambest.com)