CEDAR RAPIDS —It was a big purchase — some $191 million. But United Life had been hoping to break into new markets, and now it seemed the time was right.
The Cedar Rapids-based insurance company was ready and able to buy Mercer Insurance Group of Pennington, N.J., last year because of decisions that had been made throughout its growth.
Back in 1962, John F. Kennedy was in the White House, Jack Nicklaus beat Arnold Palmer in a playoff at the U.S. Open and “Stop the World — I Want to Get Off” opened on Broadway. That same year, United Fire & Casualty Co. launched a wholly owned subsidiary — United Life Insurance Co.
In the intervening 50 years, United Life has grown to $5 billion of insurance in-force. It’s been traded on Nasdaq since 1986.
And the company’s book of business is expected to continue growing with a larger footprint — Maryland, New Jersey, North Carolina, Virginia and West Virginia — where regulators recently have approved the sale of United Life’s products.
Michael Sheeley, vice president and chief operating officer of United Life, said many regional property-and-casualty insurance companies formed life insurance companies in the 1960s with the idea that their profits would help balance the cyclical nature of P&C earnings.
“You can have a year like 2012 with the least number of tornadoes in Iowa in a year and the next year you could have the most number of tornadoes in a year,” Sheeley said. “That’s part of the property-and-casualty insurance business with its peaks and cycles.
“Life insurance provides a fairly stable revenue stream. The actuarial science of the predictability of life expectations is pretty consistent.”
United found success with its new life insurance company, which Sheeley attributed to how the late Scott McIntyre Jr. developed the company through independent agents.
“A number of property-and-casualty insurers mandated that their agents also write life insurance,” Sheeley said. ”Scotty, who was treasurer and comptroller of United Fire at that time, had the vision to see that some of those agents were like round pegs in a square hole.
“They were great agents on the property-and-casualty side, but they didn’t have the experience or comfort selling life insurance policies. To mandate your success as a life affiliate by only having property-and-casualty agents as your distribution system was a recipe for failure.”
McIntyre, who later served as president, CEO and chairman of United Life and United Fire & Casualty, welcomed financial advisers, small banks and independent insurance agents to sell United Life products. United Fire & Casualty agents also were offered the opportunity to sell United Life, but they were free to refuse.
“The independent insurance agent model was absolutely key to our success,” Sheeley said. “Hard work has built this company over the years without acquisitions. It’s all been through organic growth.”
By 1976, when John Rife joined United Life, it had insurance in-force of $230 million. (“In-force” refers to the dollar amount of insurance that a company has issued, measured as the total of policy face values and dividends.)
Rife, who served as United Life president for 25 years, was instrumental in the early introduction of universal life policies, which were new to the industry.
In the interest rate environment of the 1980s, universal life propelled United Life’s insurance in-force from $427 million to $1.8 billion in just four years. Rife would go on to serve as president and CEO of United Life Group, corporate parent of United Fire & Casualty and United Life, until he retired in 2009.
Randy Ramlo, United Life Group president and CEO, said United Life played a key role in the March 2011, $191 million acquisition of Mercer Insurance Group of Pennington, N.J.
“The long-term financial strength of United Life helped us buy Mercer Insurance,” Ramlo said.
The Mercer Insurance Group purchase was financed with $100 million in available cash and $125 million from existing lines of credit and a loan from the Federal Home Loan Bank of Des Moines, with a fixed interest rate of 3.6 percent for 20 years.
At the time of that 2011 announcement, Ramlo pointed out that United Fire had been planning to enter the mid-Atlantic and West Coast markets for years “because of the potential to diversify our risk profile and increase the scale of our operations. Mercer Insurance has a long track record of operating profitably in these markets ….”
With the deal, United Fire was able to market insurance through about 1,400 independent agents in 24 states.
Sheeley said Mercer P&C agents will be offered the opportunity to sell United Life products, but there will be no mandate, adhering to the strategy that has served United Life well since its inception.
“We’re fortunate that a number of our broker dealers already sell into some of these new states,” Sheeley said. “They’ve been asking when we will be up and running so they can start marketing United Life products.”
Sheeley said United Life also attributes its success to employees who understand the importance of customer service in sales.
“I have had agents call here with a client in their office just to prove the point that we have human beings answering the phones,” he said. “They want to show that customer service is a cornerstone of this company.”