Insight, analysis & opinion from Joe Paduda
Seventy years. That’s how long its been since the P&C insurance industry enjoyed profit levels like today’s. The Dust Bowl was in full blow, there was no TV, half the people worked on farms, and Roosevelt II was just getting started.
The good old days are back.
In a move designed to reassert control over the mechanisms of government, Pres. Bush recently signed an executive order requiring all regulatory directives be approved by political appointees. (registration required)
This will have a significant impact on occupational health initiatives, regulations, and enforcement.
In what will come as no surprise to anyone, Congress will eliminate the pending cut in Medicare physician reimbursement. Not only that, but docs who agree to report certain data to CMS will actually get a 1.5% increase in reimbursement from the Feds.
If you listen very closely, you can almost hear the medical community’s resounding “yippee”.
The reasons docs are not exactly ecstatic about the news are two-fold.
Cypress Care, one of the leading Workers Comp Pharmacy Benefit Management firms, has just announced the company has received a “strategic investment” from Dallas-based Brazos Private Equity Partners. The company has also added David George (former President of AdvancePCS) to the management staff; George will be taking over the CEO spot from co-founder Hank Datelle and has also made an investment in Cypress Care.
The press release contains the typical comments about all parties’ delight at the deal and enthusiasm for the future. As one who has been directly involved, I can attest that in this case, the PR has it right. David George is a highly experienced and very well respected managed care pro with stints at United Healthcare and on the Board of Concentra, Inc. Bart Hester, a former colleague of George’s at AdvancePCS will be joining Cypress as EVP Account Management and Strategy; the rest of the Cypress senior management team including co-founder Lisa Datelle and President Marc Datelle are all staying with the company.
Note – Cypress Care is a Health Strategy Associates consulting client an dsponsors our annual Survey of Prescription Drug Management in Workers Compensation.
The soft market, that’s what.
While I’m somewhat reluctant to cite bomb-thrower Robert Hunter of Americans for Insurance Reform, he does make a good point. AIR’s recent pronouncement that the med mal crisis appears to have abated in large part due to the underwriting cycle is correct.
My take is the med mal crisis is largely an invented one. Yes, it is a problem for specific specialties and in specific areas. But it is NOT due to large jury awards; it is a result of insurance cycles and pricing.
The march off the cliff has begun in earnest. A new survey indicates underwriters are starting to hold their collective nose and write business that would not have merited a “no thanks” a year ago. As usual, larger risks are getting the best deals, but even small accounts are seeing discounts at renewal.
Florida is one of, or perhaps the only, state to have as an official elected position a state CFO. The incumbent is supposed to oversee state spending, review state contracts and investigate insurance fraud among other functions. Florida’s CFO is also part of the four person cabinet along with the governor, attorney general, and Commission of Agriculture and Consumer Affairs.
Obviously, the CFO would have a broad and deep impact on the state’s insurance industry, the provision of same, and purchase of insurance by the state. That makes it interesting for we insurance types.
OK, for the last and final time, Zurich and StPaul-Travelers are not merging, one is not acquiring the other, there are no due diligence conversations going on, books have not been exchanged, and whatever else I can say to convince the rumour hounds that this one has no basis in fact.
Could they merge at some point in the future? Perhaps. But there are no substantive discussions going on today, and there would be if the two companies were thinking about doing a deal.
How do I know? And do I know with 100% certainty? No to the latter, but 95% yes. As to sources, colleagues in both organizations have been denying this for months, and StPaul-Travelers went so far as to issue a denial. And a pretty firm one at that.
Sheesh. I wonder if Oliver Stone is behind all this nonsense…
Projections for insurer profits this year are looking pretty rosy, at least according to Fitch Ratings. For most property and casualty insurers, profits are up over last year at this time, losses are down, and premium growth continues to trend slightly upward as well.
As always, profits are only as solid as tomorrow’s weather forecast, and few insurance execs think they’re out of the woods yet.
In a transaction that surprised many (including me), Atlanta-based claims administrator Crawford and Co. announced it is acquiring FL-based Broadspire Services from investment group Platinum Equity. The deal is valued at $150 million, and will move the combined companies into third place on the list of top property and casualty TPAs (third party administrators; firms that process claims on a fee-for-service basis without taking any insurance risk).
Broadspire CEO Dennis Replogle will be staying with the new company, which likely will go thru some transition and specialization as Crawford figures out where it fits in.
The deal is another in the ongoing parade of consolidation that started with the original firesale of Kemper National Services to Platinum several years ago. Since then, Sedgwick was acquired by Fidelity National and then bought CMI; Broadspire bought Cunningham Lindsey and RSCKO, and several smaller deals were consummated as well.
Rumors had been circulating for some time that Sedgwick CMS was looking at Broadspire, and internal sources at the target company reported that Sedgwick staffers had been at the Broadspire offices in Plantation FL. Sedgwick management has been under serious pressure to increase revenues, and absent serious price cutting, a large acquisition looked to be the most likely route.
If the price seems low, it may be due in part to the timing of the deal. The softening insurance market (which may not be softening for long) makes insurance a better buy in some instances than going self-insured. If the market does turn, Crawford will be able to congratulate itself for buying at the right time.