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C A R R I E R N E W S
SwissRE/GEIS Combo Gets Thumbs Up
GEIS agent program leadership talks about
future of Big “I” E&O program.

When the world’s second-largest reinsurer agrees to acquire the fifth-largest reinsurer, it’s no surprise that extensive media coverage occurs. But surprisingly, agents are still thirsty for more information.

Into the information void arrives Robin Sterneck, president of primary markets at GE Insurance Services (GEIS). GEIS is the umbrella organization that controls Westport Insurance Company, IIABA’s long-term partner in providing members their agency errors and omissions insurance.

In two conference calls on Wednesday, Nov. 30, 2005, Sterneck summarized the Swiss Re/GEIS pending deal and answered questions from Big "I" state association staffs, Big "I" Professional Liability Committee members and national staff. Mark Male, relationship manager for the agent’s program, and Sabrena Sally, head of underwriting for the agent’s program, joined Sterneck on the calls.

"People have been asking me since a week ago Friday, why I’ve had this silly grin on my face," joked Sally as she described GEIS staff members’ reaction to the news of their future home with Swiss Re.

Sterneck echoed that feeling, noting that the new home for the $6 billion in insurance premiums Swiss Re is acquiring "is better fit for the [agent’s E&O] franchise." She went on to say she will miss being a part of GE and ERC Group President Ron Pressman, but she looks forward to "being more nimble and being a part of an organization that wants to grow in insurance."

Warren Ruppar, the Independent Insurance Agents of Connecticut’s executive vice president, noted he has seen some competitors of the Big "I" E&O program portraying the merger negatively: "I saw where one competitor seems to be conveying that the Westport Insurance Company might be downgraded due to the acquisition." Sterneck responded, "…We can’t control what the competition says, but the outlook is in fact the opposite for our financial strength."

At the time of the merger, A.M. Best rated Swiss Re an A+ and S&P rated it AA. A.M. Best rates Westport an A and S&P rates GEIS as A. Both rating agencies have indicated they are watching these ratings for needed changes. "How (can) anyone project anything but a higher average financial position for Westport…particularly with part of the Swiss Re deal calling for an additional $3.5 billion in reserves to be added by GE?" Mark Male said.

Sterneck noted that one of the often stated, main criteria for Swiss Re to make the deal is maintaining its AA rating. "Swiss Re knows how the rating agencies hate surprises and they were fully informed very early," she said. "I expect no surprises."

Another question during the call was what changes might be noticeable by insured members and state association staff with respect to the national E&O program. Sterneck said, "No changes."

Sally added, "We have some positive changes coming, but they have been in the plans for some time."

"Plans for all significant changes are reviewed with the Big ‘I’ Professional Liability Committee, and they will continue to oversee the program," Male said.

When Big "I" Advantage Team President Paul Buse asked how aware Swiss Re’s senior leadership is of the agent’s program, Sterneck replied: "Very aware."

The Big "I" book of agency E&O business represents more than 10% of the primary business Sterneck oversees. She noted that both CEO Designate Jacques Aigrain and the new head of the North American business from Swiss Re, Pierre Ozengo, know about the book and have specifically discussed it. "Swiss Re knows what they bought and the agents book is a big part of that," she said.

Big "I" Professional Liability Program Director David Hulcher pointed out that a good benchmark for a company’s future is analyst analysis, and analysts at firms like Bear Sterns and First Boston are on the whole very positive about Swiss Re and, hence, the future for the GEIS acquisition. "If you go to the Swiss Re Web site you can see that 89% of analysts view the future of Swiss Re as outperforming or in-line with their expectations," Hulcher said.

Analyst View	Count	Percent
"Buy," "Outperform," "Add" or "Kaufen"	13	48%
"Neutral," "Hold," "Marketperform," "Sector Perform" or "In-line"	11	41%
"Reduce" or "Sell"	2	7%
"Übergewichten" (undecided)	1	4%
Total	27	100%

Sterneck and her team pledged to keep Big "I" state associations staffs and the Professional Liability Committee apprised transition developments and expressed a willingness to have additional conference calls as the need arises.

For more information on the program, contact David Hulcher at 800-221-7917; david.hulcher@iiaba.net.

C A R R I E R N E W S
Allmerica Name Change to “The Hanover” Official Today
Eppinger talks to IN&V about company’s transition.

The New York Stock Exchange is home to a new ticker symbol today—THG, the new symbol for a re-branded insurance carrier. Effective today, Allmerica Financial Corporation has changed its name to The Hanover Insurance Group, Inc ("The Hanover").

IN&V talked with Fred Eppinger, president and CEO of The Hanover, about the company’s renewed p-c focus and re-branding effort.

IN&V: Discuss the transition of the company over the past few years and how it culminated in the re-branding effort.

Eppinger: I’ve been here two and a half years, and right from the beginning, we focused on creating a world-class regional company—and really focusing on the p-c business. Hanover and Citizens are over 150 years old and from 1979 to 1995, we were one of the 10 best underwriting companies in the country. But from 1995 until about 2002, the company spent most of its time focusing on asset management and the p-c companies got a little neglected. That was when they changed the name to Allmerica and went public. And they really focused on variable annuities and the asset management accumulation products.

When I got here, that part of the business got in trouble when we had the terrible equity markets four years in a row. I ended up selling all that asset management business and really decided to refocus the company on what I think is the crown jewel of the institution: the p-c businesses. We really started focusing on that about 28 months ago.

IN&V: What made you see the p-c part of the business as the company’s strength?

Eppinger: The No. 1 thing I did when I came was talk to probably 600 agents. I realized how much the agents loved their companies. The big reason I wanted to invest in the p-c- business was because it was clear to me the franchise value was so strong.

IN&V: What was your first step in making that transition back to a p-c focus?

Eppinger: What I needed to do was be very clear about where we were going. Our business has become a very complicated business, and all too often, p-c companies don’t have a soul. They are run like a balance sheet. I talked about the fact that this would be a financially strong company but also one that invested in having the very best people.

Then we came up the three strategic pillars that we live by: partnerships with the winning agents in the country; innovative products that help companies grow; and responsive service.

We call it "best of both." We say, yes, we’ll have the people, operating models and the technology of the large national players, but we’ll the soul and responsiveness of a regional company. We’re going to be the most responsive insurance company in this country. And we’re going to watch our relationships blossom because we’re going to hustle. We’re going to beat companies 10 times our size because we’re going to have great skills but also great care. The reason I believe so many people are talking about us right now is because we are all about being the most agency-focused, responsive company in the country.

We’re a little bit of a weird duck. I tell everyone that it’s hard to characterize us. From a strategy point of view, it’s like putting The Hartford and Cincinnati Financial together into one company.

IN&V: Do you see the new branding effort and name change as a culmination of the strategy change and chance to reintroduce the company?

Eppinger: Even for the agents that know us well---we’re different than we were two years ago, two months ago and even two weeks ago. What this gives us a chance to do is reintroduce ourselves to the market. Sometimes as a company it’s the right time to step back, take stock and reintroduce yourself because you’ve been through so much change.

Eppinger: I knew when I came here two and a half years ago that we needed to do something with the name. When you think about Allmerica, you can’t even pronounce it. Most people put the "a" in there. And when you think about brands, most brands are shared verbally, so when you can’t pronounce the name, it hurts you.

The other thing was nobody knew what Allmerica Financial was. We sold all of our products under Hanover and Citizens but Allmerica was on the New York Stock Exchange and signs. It was really something built to separate or escape from insurance—they wanted people not to think of them as an insurance company. I knew early on that I needed to figure this out. So many agents said, ‘Who are you?’ We were called so many different things in so many different forums that a lot of people wanted us to think about a name change.

We worked on it for about a year and tested with a lot of people. And what we found was that the Hanover name was really the strongest name in every state but Michigan. People remembered Hanover when it was a strong regional company and connected with that name. It had legs with the agents. It was clear that if we were going to change to one name that was the one we wanted to use. And then we found out that Citizens was incredibly strong in Michigan, so we’re keeping that.

In terms of the look, red and blue tend to represent national companies—look at Coke, Pepsi, Bank of America, etc. Green usually tends to represent regional companies, and it was traditional with Hanover. So that’s why we used it—to bring us back to our regional company roots. We wanted to show our stability. We wanted a name that conveyed longevity, and with the Hanover name being around 150 years, it accomplished that.

Look in the January issue of IA for the complete interview with Fred Eppinger, president and CEO of The Hanover, on the company’s transition and new branding initiative.

P R O D U C E R C O M P E N S A T I O N I S S U E U P D A T E
Greenberg Will Not Face Spitzer Criminal Charges

Although his legal woes are far from over, Maurice "Hank" Greenberg did receive some good news last Friday when a spokesperson for New York Attorney General Eliot Spitzer said that Spitzer will not pursue criminal charges against the former American International Group CEO.

According to spokesman Darren Dopp, Spitzer decided this back in May when he filed a civil complaint against AIG, Greenberg and former AIG Chief Financial Officer Howard I. Smith.

"We made a decision months ago that civil disposition was the better and more appropriate way to proceed," Dopp told Bloomberg News.

The Los Angeles Times notes that this is the third time this year that Spitzer decided not to press criminal charges in highly publicized investigations.

"People are going to say that Spitzer is scared to pursue criminal cases," Steve Thel, a securities law professor at Fordham Law School told the LA Times. "I don’t know that that is true—criminal cases in this area are awfully difficult to prove."

Although he will avoid Spitzer-related criminal charges, Greenberg is not out of the legal hot seat. According to The Washington Post, Dopp said that Spitzer is considering adding additional civil charges to the already filed complaint "to include allegations that Greenberg ordered improper stock trades," the Post says.

In the current civil lawsuit, Greenberg, Smith and AIG face charges of "[misleading] investors and regulators by engaging in illegal transactions that inflated the size of the insurer’s reserves, disguised underwriting losses as capital losses and created false underwriting income," according to the Post.

Greenberg and AIG remain at the center of other criminal investigations, according to the Post. Federal prosecutors in New York are investigating possible criminal activity related to stock trades. Meanwhile, federal prosecutors at the Justice Department in Washington and in the Eastern District of Virginia are investigating AIG’s use of finite reinsurance.

In related news, Greenberg sat down with BusinessWeek’s Maria Bartiromo for an interview in early November and discussed his current business pursuits.

"CV Starr & Co. and Starr International Co. [are] invested in private equity and are co-investing with others; commitments of about $400 million so far," he said in the interview. "Starr money is being invested in both the U.S. and a number of countries in Asia."

When asked if he thinks CV Starr could one day rival AIG in size, Greenberg responded: "Could be. I think big, Maria."

L E G A L & F E D E R A L A D V O C A C Y
New California Fax Law Reaches Outside the State

A new state law on unsolicited fax advertisements within a state is not all that unusual. But a new state law on unsolicited fax advertisements coming into the state from outside the state is getting a lot of attention.

On Oct. 7, California Governor Arnold Schwarzenegger signed a bill into law that makes it unlawful to send an unsolicited advertisement within California via fax unless the sender has first obtained the recipient’s express permission. The same bill also makes it unlawful for anyone to fax an unsolicited advertisement to any California recipient from anywhere outside of California unless the sender has first obtained the recipient’s express permission. The law becomes effective on Jan. 1, 2006.

Other requirements of the new law require that fax communications into or within California clearly mark, in a margin at the top or bottom of each transmitted page or on the first page of each transmission: 1) the date and time sent; 2) the identity of the sender of the fax; and 3) the telephone number of the sending machine, business or individual.

It is important to note that the new California law is more restrictive than the federal law, the Junk Fax Prevention Act of 2005, which provides that individuals and entities, such as insurance agents and brokers can send unsolicited commercial faxes provided: 1) they have an established business relationship with the recipient; and 2) they provide recipients with the opportunity to opt-out of receiving future unsolicited commercial faxes. (Information on the Junk Fax Prevention Act of 2005 is available on the member-only Legal Advocacy page of www.independentagent.com under Memoranda & FAQs.)

Unsolicited faxes sent by or on behalf of a non-profit professional or trade association are exempt from the new California law as long as the fax is sent to a member in furtherance of the association’s tax-exempt purpose and the following conditions are met: 1) the member has voluntarily provided the association with the fax number; 2) the primary purpose of the fax is not to advertise goods or services of any third party; and 3) the member has not asked that the association stop sending faxes advertising the goods or services of any third party.

Violations of the new California law can lead to a lawsuit for injunctive relief, actual or statutory damages of $500 per violation (whichever is greater), and for willful violations, three times the greater of actual or statutory damages.

There is some effort underway to challenge the new law as it applies to faxes sent to California recipients from outside of the state. The Chamber of Commerce of the United States of America ("Chamber") and Xpedite Systems, LLC, filed suit in the U.S. District Court for the Eastern District of California Nov. 7, 2005 challenging the new California law. In a statement issued by the Chamber, Stephen A. Bokat, executive vice president of the National Chamber Litigation Center, the public policy law firm of the Chamber, said, "Businesses should not be required to obtain permission from each and every recipient of their advertising faxes where there is an established business relationship." He went on to say, "California’s failure to enact such an exception will impose unnecessary costs on businesses attempting to navigate the now-conflicting federal and state laws."

A hearing is scheduled for Jan. 9, 2006, on a motion for a preliminary injunction filed by the Chamber and on a motion to dismiss filed by the California Attorney General’s office (which is a defendant in the suit).

In addition to this suit, the Fax Ban Coalition, of which IIABA is a member, has asked the Federal Communications Commission, in a Petition For Declaratory Ruling, dated Nov. 7, 2005, to clear up the conflict between the California and federal fax laws by requiring that the federal fax law preempt the California law for faxes to California residents originating out-of-state as well as for faxes sent from California to out-of-state recipients. The Fax Ban Coalition feels that California’s new fax law conflicts with the federal fax law by its failure to include the established business relationship exception present in the federal law.

IIABA will monitor these efforts and will, as appropriate, provide updates concerning their status.

For more information about the California fax law, contact Big "I" Senior Vice President of Government Relations and State Government Affairs Wes Bissett at wes.bissett@iiaba.net; 202-863-7000.

For more information about the lawsuit brought by the Chamber, or the Fax Ban Coalition petition before the FCC, contact Big "I" Director of Federal Government Affairs Patrick O’Brien at patrick.obrien@iiaba.net; 202-863-7000.

Yesterday, a federal judge in Virginia rejected a proposed settlement in a patent infringement case involving the makers of the popular BlackBerry. This took place in a lawsuit filed by NTP Inc. ("NTP") against Research in Motion Ltd ("RIM"), the maker of BlackBerry, claiming that BlackBerry’s technology infringes on NTP’s patents for wireless communication.

The judge’s rejection of the $450 million proposed settlement between the two companies means that RIM may face a choice between either settling the case for a lot more money (speculation is that a settlement may run more than $2 billion) or imposition of a permanent injunction, which would require BlackBerry to shut down operations in the United States. Settlement talks between the two companies broke down in June, but RIM was hoping that the judge would enforce the $450 million term sheet to a proposed settlement reached earlier with NTP. The judge held that the term sheet was not an enforceable agreement.

The patent infringement case was filed back in 2001, and the jury found that RIM infringed on NTP’s patents. The judge then stayed enforcement of the injunction against RIM’s use of the technology used to run the BlackBerry pending certain appeals. The federal appeals court ruled that some of NTP’s patents were invalid, but some were valid and infringed upon by RIM. The appeals court then sent the case back to the trial court for further proceedings on the patents it determined were valid and infringed upon by RIM. In addition, the U.S. Patent and Trade Office has preliminarily rejected all of the patents at issue in the infringement case. RIM had requested that all proceedings in the trial court be stayed pending the final determination by the U.S. Patent and Trade Office on the validity of the patents, and RIM also requested of the court a stay pending its appeal to the U.S. Supreme Court following the federal appellate court determination of the validity and infringement of certain of NTP’s patents. Yesterday, the trial court judge refused to delay the case for either reason.

According to a RIM press release, RIM is working on workaround technology to allow continued use of BlackBerry devices without violating the NTP patents; however, RIM has provided no details on its approach to accomplish that. If the trial court judge reissues the permanent injunction based upon the federal appellate court’s determination of infringement, RIM may have as little as 30 days to either settle the case or shut down U.S. operations. NTP has claimed that it will continue to allow service to continue for government and emergency workers even if other service is stopped.

Because many Big "I" members utilize BlackBerry handheld devices, the Big "I" will continue to monitor these developments and will provide updates to this litigation as they become available.

There’s a widely held belief that it’s difficult to have any meaningful life insurance production between Thanksgiving and New Year’s Day. Independent agents who sell life insurance use this period to do a lot of service work and make sure that all outstanding cases are completed and included in 2005 production. They busily scurry around to collect signatures on disclosures, call and e-mail insurance carrier home offices and try to handle personal logistics of the holiday season.

Conventional wisdom holds that you should wait until after Jan. 1 for cold calling. However, prospecting and sales are not activities to treat like the children’s game "red light green light." If you stop these activities, you lose momentum and opportunities.

Good agents are always on the lookout for clues on business activities, whether it is passing a new delivery truck for an expanding local business or reading a corporate promotion in the local newspaper. Keep track of these developments and file them for a future letter (and gauge whether any current customers might refer you).

One of the best reasons to contact someone (remember to not run afoul of the Do Not Call rules) is a deadline that requires action. So instead of treating the end of the year as down time, take advantage of the Dec. 31 deadline to contact existing customers or to reach out to new prospects.

What is a good year-end topic to raise? Take a simple concept like charitable giving. First, turn to your file containing local newspaper clippings that list board announcements of local charities and contact them to ask if they are interested in discussing a tax-savings technique that their charity can be use to raise money. The concept is simple: The individual purchases a life insurance policy with the charity named as the owner and beneficiary of the policy. Each year, the person pays the premium by making a contribution to the charity (i.e. $2,000 annually for $100,000 of permanent life insurance) that is used to pay the premium. The donation is tax-deductible. What if the person says that it doesn’t confer a current benefit to the charity? It certainly does as the cash value of the policy counts as an asset for the charity’s balance sheet and can allow it match up a replacement fund for a large capital expenditure down the road such as structural.

And what if this concept does not work for a particular person you discuss it with? It doesn’t matter because the concept got you the appointment and positions you as a professional in the field that is interested in helping out the community. Many times at a meeting like this, the prospect says, "I really need to increase the amount of my personal life insurance." It’s important to remember marketing that generates selling quite often is a matter of timing. If you get in front of enough prospects--- and ask for the sale--- results will happen.

This holiday season, don’t fall into the trap of sitting in front of the computer in your office. Get out of the office and see people. Breakfast meetings are especially good at this time of year.

Dave Evans (dave.evans@iiaba.net) is a certified financial planner and IA l-h contributing editor.

O N T H E H I L L
Soto Testifies Before NCOIL on Natural Disasters
Big “I” president-elect urges preparedness for future catastrophes.

Big "I" President-Elect Alex Soto, CPCU, ARM, of Miami, Fla.-based InSource, Inc., testified just before Thanksgiving on a panel titled "Recovering from Katrina and Rita: Exploring the Profound Consequences" at the annual meeting of the National Conference of Insurance Legislators’ (NCOIL) on Nov. 19.

Representatives from all segments of the industry joined Soto, representing agents and brokers in the roundtable discussion, on the panel. They explored many of the issues and questions raised in the wake of hurricanes Katrina, Rita and Wilma, including the storms’ effects on the insurance marketplace, the ability of the private insurance market to cover future catastrophic losses, the possible role of the federal government in bolstering capacity, the importance of mitigation efforts in advance of storms and the state of the National Flood Insurance Program (NFIP).

Soto addressed the nation’s preparedness and the insurance industry’s capability to respond to future mega-catastrophes. "We are not seriously attacking these issues today, and we need to get a collective backbone," Soto said. "Now is the time to act."

Soto urged the industry and policymakers to be better prepared for the inevitability of future disasters and to improve existing mechanisms. "What we have now is not working, and there is a need and a proper place for federal involvement," he said. "We need more homeowners participating in catastrophe insurance programs like the California Earthquake Authority, and we need more companies writing policies that will protect consumers when disasters strike."

Soto noted that Florida sells more flood insurance than the next 10 states combined and echoed earlier calls from the Big "I" for NFIP reform. "The flood insurance program needs to be modernized," Soto said. "The coverages available today are not sufficient, and the policy is archaic. We also have got to find ways to get more people into the flood program."

The Big "I" continues to urge legislators to take action on mitigation proposals, such as building codes and inspection systems. Soto noted that Hurricane Wilma, which was a Category 1 storm when it passed through south Florida, did tremendous damage and explained that the coastline is not prepared for more powerful storms. Wilma, as a relatively minor storm, created a host of infrastructure problems in south Florida, knocking out the electrical system for over a week in many places. Business interruption was a major problem as a result.

"We need to get serious about mitigation and building codes immediately," Soto said. "We have far too many people building and rebuilding in irresponsible areas and in irresponsible ways."

He also discussed the need to encourage and promote retrofitting of existing homes.