Shrusti

MP Guru
American Reprographics Company (NYSE: ARP) is the largest reprographics company in the United States, providing business-to-business document management services to the architectural, engineering and construction (AEC) industry. It also provides these services to companies in other industries that require sophisticated document management services. The company provides its core services through a proprietary suite of reprographics technology products, a nationwide network of locally-branded reprographics service centers, and facilities management programs at customers' locations throughout the country.

Founded in 1988 as a single reprographics firm in Southern California by S. "Mohan" Chandramohan (now Chairman of the Board), the company has grown into a national corporation with 2006 revenues of $591 million.

Corporate headquarters are co-located in Walnut Creek, California.

The company, with more than 40 operating divisions, employs more than 4,500 employees, and serves more than 140,000 customers nationwide. ARC continues to grow through acquisition.

On February 3, 2005, ARC announced pricing of its initial public offering of 13,350,000 shares of common stock at $13.00 per share for gross proceeds of $173,550,000. $92,690,004 of the proceeds went to ARC, $68,711,496 went to selling shareholders.[1]

ARC created the products PlanWell, Pinadmin, BidCaster, Metaprint, Sub-Hub and Abacus — applications aimed at solving problems of the reprographic and construction industries with sharing, transferring and managing printed and digital data.

American Re Corporation is a member of the Munich Re Co., the largest reinsurance company in the world. The third largest provider of property and casualty reinsurance in the United States, American Re operates through primary subsidiary American Re-Insurance, which offers treaty and facultative reinsurance to insurance companies, large businesses, government agencies, pools, and other self-insurers around the world. American Re also provides insurance brokerage and risk management services.

Insuring the Insurers: Early 1900s-1940s

Reinsurance companies, while operating in relative obscurity compared with insurance establishments, play a key role in insurance markets. They provide stability by insuring the insurers. A company that primarily insures homes in California, for example, would likely be bankrupted by a major earthquake. By purchasing reinsurance, the company can protect itself from such catastrophes.

The property/casualty insurance industry, which American Re serves, was in large part a corollary of the Great Fire of London (1666), after which fire insurance was established. In the United States, it was not until early in the 20th century that the hazards of wind, water, damage, personal accident, and explosion were added to established lines of fire insurance. Major British companies, such as Lloyd's of London, provided most reinsurance for American insurers during the early- and mid-1900s.

The American Re-Insurance Company, the first U.S.-owned reinsurer, was founded on March 15, 1917 in Huntington, Pennsylvania. Seven families in that coal mining region formed the enterprise as a vehicle to provide a workers' compensation program for local miners. Because of a dire need by mining families for protection from risks associated with dangerous mining occupations, the company grew quickly. In 1921 the company moved its headquarters to Philadelphia, allowing it to better serve its geographically expanding business. Likewise, the organization transferred its headquarters to New York City in 1933, using the temporary title New York Re-Insurance Company.

American Re continued to expand during the 1930s and 1940s, as property and casualty insurance increased in popularity. During that period, insurance companies were regulated solely by state governments. Therefore, insurance practices varied by region. In 1944, however, the federal government, in United States v Southeastern Underwriters Association, made the insurance industry subject to Congressional powers. Growth was particularly brisk after 1948, when states began allowing insurers to write multiple lines of insurance rather than limiting them to just one segment of the market. These changes, combined with strong demand for all types of insurance by burgeoning U.S. corporations, generated an influx of reinsurance activity.

Growth and Expansion: 1950s-80s

American Re broadened its scope in the 1950s by acquiring American Reserve Insurance Company, of New York. In 1963, moreover, it purchased Inter-Ocean Reinsurance Company, of Cedar Rapids, Iowa. The company continued to boost its assets and services throughout the mid-1900s by focusing on customer service, cultivating long-term client relationships, diversifying its products and services, and emphasizing a conservative approach to investing its assets and reserves. In addition to its acquisition activities and straightforward management style, the company broadened its operations through international expansion beginning in the 1950s.

A fundamental goal of the company's overall business strategy during the mid-1900s (and into the late 1900s) was a reduction of the effect of underwriting cycles on its financial performance--the insurance industry, in general, is heavily impacted by inevitable downturns in new insurance underwriting activity. By diversifying globally and across markets, and by securing long-term relationships with healthy clients, American Re was able to weather industry downturns with few financial problems compared with many other reinsurance industry participants. Going into the 1990s, for example, American Re continued to serve clients enlisted shortly after it was founded.

Aetna Life and Casualty Insurance Company, of Hartford, Connecticut, purchased American Re in 1969 in an effort to diversify its holdings. Under Aetna's ownership, American Re continued to attract new clients, boost its reserves, and expand geographically. Indeed, during the 1970s and 1980s the company opened offices across North America--in San Francisco, Kansas City, Chicago, Dallas, Atlanta, Montreal, Minneapolis, and several other cities. It also initiated operations in Mexico City; Bermuda; Bogota, Columbia; Santiago, Chile; Tokyo; Singapore; Melbourne and Sydney, Australia; London; Brussels; Vienna; and Cairo, Egypt.

Although Aetna paid only $340 million for the reinsurer, its new subsidiary proved, over time, to be a major boon to its bottom line. By the early 1980s, in fact, American Re was underwriting about $400 million in reinsurance premiums annually, despite a cyclical industry recess that lingered through 1984. During the mid-1980s, a cyclical upswing propelled American Re-Insurance's underwriting revenues to more than $1 billion by 1987, providing a healthy addition to Aetna's aggregate earnings during that period.

Relatively healthy reinsurance underwriting activity, combined with relaxed regulatory oversight of insurance industry investment practices, induced several new companies to enter both the reinsurance and insurance industries during the mid-1980s. Despite unspectacular profits from insurance underwriting activity during that period, many insurance companies were able to generate fat profits by placing their assets in lucrative, yet risky, investment vehicles, such as real estate and junk bonds. Reinsurers benefited.

In the late 1980s, however, the insurance industry suffered from numerous setbacks. Sloppy management and investment practices caught up with many insurers in the late 1980s, as interest rates and investment returns plummeted during the U.S. economic recession. Worse yet, record losses from catastrophes jolted property/casualty insurers in 1989, 1991, and 1992. Hurricane Hugo, the San Francisco earthquake, the Oakland fires, and hurricanes Andrew and Niki stressed insurance industry reserves with billions of dollars in damage. As property/casualty insurers filed record claims, many reinsurers suffered a significant depletion of their reserves.

Despite general industry turmoil, American Re profited from the conservative investment and management approach that it had practiced throughout most of the century. As the number of establishments competing in the U.S. reinsurance industry plummeted from about 130 in the mid-1980s to approximately 60 by 1992, American Re managed to increase its underwriting revenues, boost its reserves, and increase its annual operating income. For example, American Re-Insurance's combined ratio (a standard industry statistic reflective of financial stability) was the best (lowest) in the reinsurance industry in the early 1990s and had remained significantly below the industry average throughout the 1980s.

American Re-Insurance's stability became increasingly important to the Aetna organization during the U.S. recession. In 1989, for example, the subsidiary contributed $128 million of Aetna's total $676 million in earnings. As Aetna's insurance company investments plummeted in value during the early 1990s, moreover, this ratio ballooned. In 1991, in fact, Aetna's earnings had slipped to $505 million, of which $133 million, or 26 percent, came from American Re Company. Despite its reliance on the reinsurer, Aetna decided to sell the operation in 1992 in an effort to generate much-needed cash to shore up its lagging insurance divisions.

Ownership Changes in the 1990s

Kohlberg Kravis Roberts & Co. (KKR), in the largest leveraged buyout in history of the U.S. insurance industry, purchased American Re Company in 1992 for $1.43 billion. KKR formed a new entity, American Re Corporation, to act as a holding company for American Re-Insurance Company (American Re) and related subsidiaries. Although KKR was taking ownership of the company, it planned to leave direct control of American Re in the hands of existing management. 'We'll be a stand alone, separate company and will be totally unrelated to other KKR companies,' said Edward Jobe, American Re CEO since 1987, in the June 24, 1992 issue of Business for Central New Jersey.

American Re's management strategy following the KKR takeover entailed a four-pronged approach complementary to the organization's legacy of stability and conservatism: Client focus, financial strength, global reach, and commitment to innovation. Client focus was achieved by taking a specialist, or 'Whole Account Concept,' approach to service and by seeking long-term relationships. Every American Re client received a multidisciplined team of specialists to brainstorm needs and opportunities. 'We then respond with customized products and specialized services,' explained Jobe in the July 5, 1993 issue of National Underwriter. The company augmented its client focus with direct underwriting, long practiced by American Re. By underwriting reinsurance directly, rather than through independent brokers, the company believed it was able to establish better relationships and attract a more stable client base in comparison with most of its competitors.

American Re's second management guideline, financial strength, was accomplished through an ongoing emphasis on exceptional cash reserves to back its potential liabilities; high asset quality, which is the result of cautious investments and a conservative asset mix; and a lack of dependence on underwriting cycles. Indeed, in 1993 American Re retained its distinction as having the lowest combined ratio in the industry. In addition, it maintained one of the three largest surpluses in the nation, 94 percent of which was invested in cash and bonds.

Global reach, American Re's third corporate focus, was extended during the early 1990s by providing specialized services to overseas clients and by promoting a reputation for stability. The latter earmark was particularly pivotal in attracting overseas business. 'Every client in the world has access to all of our corporate resources,' Jobe told National Underwriter, 'including our multi-disciplined client teams ... which partially accounts for the substantial growth in international premium writings we've been experiencing. We have an international network of direct relationships.' American Re operated ten overseas branches on five continents going into 1994, in addition to its 17 U.S. offices.

American Re was exhibiting its commitment to innovation, its fourth corporate tenet, in the early 1990s through automation, managing environmental risks, and rethinking its catastrophic risk policies. It established computer links among its international offices during the 1980s and early 1990s, for example, allowing the company to efficiently integrate global accounting and currency efforts. The company also had implemented the use of advanced risk analysis software to help it accurately predict damage from natural catastrophes. The company had taken a leading role in the management of environmental risks as well, such as pollution and indoor air quality--an increasingly important sector of the industry in the 1990s.

In addition to its four-pronged management strategy, the company continued to achieve stability through market diversification following the KKR acquisition. The company began decreasing its reliance on conventional underwriting and investment revenues in the early 1990s, instead seeking profits from related fee services. By 1993, in fact, American Re Corporation's new subsidiaries were contributing a significant portion of earnings growth. Am-Re Services, Inc., for example, was established to provide clients with various reinsurance-related services. Likewise, Am-Re Brokers, Inc., provided client access to worldwide reinsurance resources. Similarly, the Becher + Carlson (B+C) subsidiary specialized in risk management consulting and brokerage for commercial and public entities. Finally, Am-Re Managers, Inc. provided a variety of underwriting and consulting services to noninsurance businesses.

KKR's acquisition of American Re began to pay off in 1993. Company assets grew from $5.89 billion in 1992 to more than $6.23 billion in 1993, a 5.5 percent increase. Total revenue climbed from $1.1 billion in 1992 to an impressive $1.4 billion in 1993, resulting in net 1993 earnings of $75 million. Although company growth slightly lagged behind some industry statistical averages for larger reinsurers, those figures failed to reflect American Re's stability and growth potential. For instance, the company's international division boosted its gross premiums 39 percent in 1993, to $279 million. Furthermore, American Re's debt was significantly reduced and its combined ratio improved a healthy three percentage points. Also in 1993 American Re went public, raising $413.5 million. Its stock traded on the New York Stock Exchange.

Going into the mid-1990s, American Re Corp. expected to continue to benefit most from overseas expansion and growth in fee services. The decline of competing European reinsurers, particularly Lloyd's of London, boded well for international gains. Furthermore, American Re was striving to establish itself in many fast-growth developing markets, such as Russia, China, and Eastern Europe. B+C, for example, secured a consulting contract in 1993 with one of Russia's largest companies, which was also one of the world's largest truck manufacturers. 'The new ownership will create an environment that will make it easier for us to work,' said Paul H. Inderbitzin, executive vice-president of American Re, in the September 16, 1992 issue of Business Central New Jersey. 'We will be aggressive in alternative markets ... there are no barriers for the future growth of our activities.'

In early 1995 American Re formed a joint venture with Arthur J. Gallagher & Co., a leading U.S. insurance brokerage firm. The new company, called Risk Management Partners Ltd., was based in the United Kingdom and was geared toward providing insurance and risk management services to local U.K. governmental agencies. Under terms of the agreement, American Re agreed to underwrite insurance coverage, while Arthur J. Gallagher agreed to provide risk management services through subsidiary Bassett Services, Inc.

American Re continued to enjoy success, as indicated by the company's results for the first quarter of 1996--reported net income of $49.1 million reflected an impressive 39.5 percent increase over net income during the comparable period a year earlier. In addition, net premiums written by the firm during the first quarter rose 18 percent compared with the same period in 1995.

Although American Re was a strong, profitable performer, talk of a possible sale began to circulate in the insurance industry in mid-1996. Two possible suitors included General Electric Co., and Munich Reinsurance Co. of Germany. Discussion of a sale was generated primarily following the acquisition of National Re Corp. by General Re Corp., which solidified General Re's leading position in the reinsurance market. As consolidation and competition within the reinsurance industry grew, so did speculation about acquisition candidates.

Initially, many were skeptical about the possible sale. KKR had owned American Re only since 1992, and KKR had been increasing its presence in the insurance industry. In 1995 KKR purchased Canadian General Insurance Group Ltd. and attempted to buy the property and casualty operations of Aetna Inc. In early 1996 KKR acquired the four property and casualty businesses of Talegen Holdings Inc. from Xerox Corp., paying about $2.7 billion. Selling American Re would not only lower KKR's earnings, but it would also lessen its authority in the insurance industry.

Skeptics turned out to be wrong, and in August of 1996 KKR announced that it was indeed open to offers for American Re, of which KKR owned 64.1 percent. Although Munich Re, the world's largest reinsurance company, contended early on that it was not interested in buying American Re, the company soon announced it would purchase the reinsurer for about $3.3 billion, or $65 a share. KKR, which paid $1.4 billion for American Re in 1992, stood to make a profit of $1.7 billion. The $3.3 billion was significantly more than American Re's market value, which hovered around $2.5 billion at the time of the announcement. KKR general partner Saul Fox explained the benefits of the sale to reporter Patricia Vowinkel, as published in the Chicago Sun-Times, and said, 'Given the rapid consolidation of the international insurance community, this transaction will allow American Re to continue as an industry leader, enhancing its ability to provide clients with both service and capacity. ... It is the right move at the right time for both companies, creating a larger, more formidable global competitor.' Munich Re greatly expanded its North American operations with the purchase. The company's North American market share of about 7.7 percent, which made it the seventh largest reinsurer in the United States, was significantly enhanced by American Re's share, which was about ten percent. American Re became a wholly owned subsidiary of Munich Re.

In 1997 Edward Noonan was named president and CEO of American Re, and Munich Re's American operations were merged with American Re's businesses. Restructuring commenced, and in June of 1998 the subsidiaries Becher + Carlson Companies, Am-Re Brokers, Inc., and ARB International Ltd., along with Munich Re's International Insurance consultants, were combined into Am-Re Global Services. Just a month later American Re established American Re Capital Markets, Inc., which focused on providing solutions to clients in financial markets. The business planned to start out concentrating on the weather derivatives market. In November American Re renamed its Am-Re Managers, Inc. division Munich-American RiskPartners to reflect its emphasis on globalization.

American Re continued its strategy to strengthen operations in 1999, and the firm's medical cost management program, known as American RePreferred, its alternative risk business, and its Am-Re Global Services division, among others, showed progress. In the summer American Re agreed to buy holding company American Insurance Service Inc., which owned United National Group of Companies, Inc., United National Insurance Co., Diamond State Insurance Co., and Hallmark Insurance Co.

Financial performance in 1999 was not as strong as American Re had hoped, with earnings negatively affected by catastrophic events and price competition within the industry. Although the value of gross premiums written rose from $3.1 billion in 1998 to about $3.5 billion in 1999, net income fell, from $226 million to a net loss of $101 million in 1999. Still, American Re voiced its confidence in future success. CEO Noonan wrote in the company's 1999 annual review, 'As part of the Munich Re Group, we make our living taking risk, and we believe there is a good future for those who do so prudently. Difficult times remind us of the great advantage in having a long-term approach to our partners.' American Re, with a history of stability stemming from a conservative investment and management approach, stood ready for the unpredictable future with confidence.

Principal Subsidiaries: Munich-American Risk Partners; Am-Re Global Services, Inc.

Principal Competitors: General Re Corp.; Reinsurance Group of America. Incorporated; General Cologne Re.
 
American Reprographics Company (NYSE: ARP) is the largest reprographics company in the United States, providing business-to-business document management services to the architectural, engineering and construction (AEC) industry. It also provides these services to companies in other industries that require sophisticated document management services. The company provides its core services through a proprietary suite of reprographics technology products, a nationwide network of locally-branded reprographics service centers, and facilities management programs at customers' locations throughout the country.

Founded in 1988 as a single reprographics firm in Southern California by S. "Mohan" Chandramohan (now Chairman of the Board), the company has grown into a national corporation with 2006 revenues of $591 million.

Corporate headquarters are co-located in Walnut Creek, California.

The company, with more than 40 operating divisions, employs more than 4,500 employees, and serves more than 140,000 customers nationwide. ARC continues to grow through acquisition.

On February 3, 2005, ARC announced pricing of its initial public offering of 13,350,000 shares of common stock at $13.00 per share for gross proceeds of $173,550,000. $92,690,004 of the proceeds went to ARC, $68,711,496 went to selling shareholders.[1]

ARC created the products PlanWell, Pinadmin, BidCaster, Metaprint, Sub-Hub and Abacus — applications aimed at solving problems of the reprographic and construction industries with sharing, transferring and managing printed and digital data.

American Re Corporation is a member of the Munich Re Co., the largest reinsurance company in the world. The third largest provider of property and casualty reinsurance in the United States, American Re operates through primary subsidiary American Re-Insurance, which offers treaty and facultative reinsurance to insurance companies, large businesses, government agencies, pools, and other self-insurers around the world. American Re also provides insurance brokerage and risk management services.

Insuring the Insurers: Early 1900s-1940s

Reinsurance companies, while operating in relative obscurity compared with insurance establishments, play a key role in insurance markets. They provide stability by insuring the insurers. A company that primarily insures homes in California, for example, would likely be bankrupted by a major earthquake. By purchasing reinsurance, the company can protect itself from such catastrophes.

The property/casualty insurance industry, which American Re serves, was in large part a corollary of the Great Fire of London (1666), after which fire insurance was established. In the United States, it was not until early in the 20th century that the hazards of wind, water, damage, personal accident, and explosion were added to established lines of fire insurance. Major British companies, such as Lloyd's of London, provided most reinsurance for American insurers during the early- and mid-1900s.

The American Re-Insurance Company, the first U.S.-owned reinsurer, was founded on March 15, 1917 in Huntington, Pennsylvania. Seven families in that coal mining region formed the enterprise as a vehicle to provide a workers' compensation program for local miners. Because of a dire need by mining families for protection from risks associated with dangerous mining occupations, the company grew quickly. In 1921 the company moved its headquarters to Philadelphia, allowing it to better serve its geographically expanding business. Likewise, the organization transferred its headquarters to New York City in 1933, using the temporary title New York Re-Insurance Company.

American Re continued to expand during the 1930s and 1940s, as property and casualty insurance increased in popularity. During that period, insurance companies were regulated solely by state governments. Therefore, insurance practices varied by region. In 1944, however, the federal government, in United States v Southeastern Underwriters Association, made the insurance industry subject to Congressional powers. Growth was particularly brisk after 1948, when states began allowing insurers to write multiple lines of insurance rather than limiting them to just one segment of the market. These changes, combined with strong demand for all types of insurance by burgeoning U.S. corporations, generated an influx of reinsurance activity.

Growth and Expansion: 1950s-80s

American Re broadened its scope in the 1950s by acquiring American Reserve Insurance Company, of New York. In 1963, moreover, it purchased Inter-Ocean Reinsurance Company, of Cedar Rapids, Iowa. The company continued to boost its assets and services throughout the mid-1900s by focusing on customer service, cultivating long-term client relationships, diversifying its products and services, and emphasizing a conservative approach to investing its assets and reserves. In addition to its acquisition activities and straightforward management style, the company broadened its operations through international expansion beginning in the 1950s.

A fundamental goal of the company's overall business strategy during the mid-1900s (and into the late 1900s) was a reduction of the effect of underwriting cycles on its financial performance--the insurance industry, in general, is heavily impacted by inevitable downturns in new insurance underwriting activity. By diversifying globally and across markets, and by securing long-term relationships with healthy clients, American Re was able to weather industry downturns with few financial problems compared with many other reinsurance industry participants. Going into the 1990s, for example, American Re continued to serve clients enlisted shortly after it was founded.

Aetna Life and Casualty Insurance Company, of Hartford, Connecticut, purchased American Re in 1969 in an effort to diversify its holdings. Under Aetna's ownership, American Re continued to attract new clients, boost its reserves, and expand geographically. Indeed, during the 1970s and 1980s the company opened offices across North America--in San Francisco, Kansas City, Chicago, Dallas, Atlanta, Montreal, Minneapolis, and several other cities. It also initiated operations in Mexico City; Bermuda; Bogota, Columbia; Santiago, Chile; Tokyo; Singapore; Melbourne and Sydney, Australia; London; Brussels; Vienna; and Cairo, Egypt.

Although Aetna paid only $340 million for the reinsurer, its new subsidiary proved, over time, to be a major boon to its bottom line. By the early 1980s, in fact, American Re was underwriting about $400 million in reinsurance premiums annually, despite a cyclical industry recess that lingered through 1984. During the mid-1980s, a cyclical upswing propelled American Re-Insurance's underwriting revenues to more than $1 billion by 1987, providing a healthy addition to Aetna's aggregate earnings during that period.

Relatively healthy reinsurance underwriting activity, combined with relaxed regulatory oversight of insurance industry investment practices, induced several new companies to enter both the reinsurance and insurance industries during the mid-1980s. Despite unspectacular profits from insurance underwriting activity during that period, many insurance companies were able to generate fat profits by placing their assets in lucrative, yet risky, investment vehicles, such as real estate and junk bonds. Reinsurers benefited.

In the late 1980s, however, the insurance industry suffered from numerous setbacks. Sloppy management and investment practices caught up with many insurers in the late 1980s, as interest rates and investment returns plummeted during the U.S. economic recession. Worse yet, record losses from catastrophes jolted property/casualty insurers in 1989, 1991, and 1992. Hurricane Hugo, the San Francisco earthquake, the Oakland fires, and hurricanes Andrew and Niki stressed insurance industry reserves with billions of dollars in damage. As property/casualty insurers filed record claims, many reinsurers suffered a significant depletion of their reserves.

Despite general industry turmoil, American Re profited from the conservative investment and management approach that it had practiced throughout most of the century. As the number of establishments competing in the U.S. reinsurance industry plummeted from about 130 in the mid-1980s to approximately 60 by 1992, American Re managed to increase its underwriting revenues, boost its reserves, and increase its annual operating income. For example, American Re-Insurance's combined ratio (a standard industry statistic reflective of financial stability) was the best (lowest) in the reinsurance industry in the early 1990s and had remained significantly below the industry average throughout the 1980s.

American Re-Insurance's stability became increasingly important to the Aetna organization during the U.S. recession. In 1989, for example, the subsidiary contributed $128 million of Aetna's total $676 million in earnings. As Aetna's insurance company investments plummeted in value during the early 1990s, moreover, this ratio ballooned. In 1991, in fact, Aetna's earnings had slipped to $505 million, of which $133 million, or 26 percent, came from American Re Company. Despite its reliance on the reinsurer, Aetna decided to sell the operation in 1992 in an effort to generate much-needed cash to shore up its lagging insurance divisions.

Ownership Changes in the 1990s

Kohlberg Kravis Roberts & Co. (KKR), in the largest leveraged buyout in history of the U.S. insurance industry, purchased American Re Company in 1992 for $1.43 billion. KKR formed a new entity, American Re Corporation, to act as a holding company for American Re-Insurance Company (American Re) and related subsidiaries. Although KKR was taking ownership of the company, it planned to leave direct control of American Re in the hands of existing management. 'We'll be a stand alone, separate company and will be totally unrelated to other KKR companies,' said Edward Jobe, American Re CEO since 1987, in the June 24, 1992 issue of Business for Central New Jersey.

American Re's management strategy following the KKR takeover entailed a four-pronged approach complementary to the organization's legacy of stability and conservatism: Client focus, financial strength, global reach, and commitment to innovation. Client focus was achieved by taking a specialist, or 'Whole Account Concept,' approach to service and by seeking long-term relationships. Every American Re client received a multidisciplined team of specialists to brainstorm needs and opportunities. 'We then respond with customized products and specialized services,' explained Jobe in the July 5, 1993 issue of National Underwriter. The company augmented its client focus with direct underwriting, long practiced by American Re. By underwriting reinsurance directly, rather than through independent brokers, the company believed it was able to establish better relationships and attract a more stable client base in comparison with most of its competitors.

American Re's second management guideline, financial strength, was accomplished through an ongoing emphasis on exceptional cash reserves to back its potential liabilities; high asset quality, which is the result of cautious investments and a conservative asset mix; and a lack of dependence on underwriting cycles. Indeed, in 1993 American Re retained its distinction as having the lowest combined ratio in the industry. In addition, it maintained one of the three largest surpluses in the nation, 94 percent of which was invested in cash and bonds.

Global reach, American Re's third corporate focus, was extended during the early 1990s by providing specialized services to overseas clients and by promoting a reputation for stability. The latter earmark was particularly pivotal in attracting overseas business. 'Every client in the world has access to all of our corporate resources,' Jobe told National Underwriter, 'including our multi-disciplined client teams ... which partially accounts for the substantial growth in international premium writings we've been experiencing. We have an international network of direct relationships.' American Re operated ten overseas branches on five continents going into 1994, in addition to its 17 U.S. offices.

American Re was exhibiting its commitment to innovation, its fourth corporate tenet, in the early 1990s through automation, managing environmental risks, and rethinking its catastrophic risk policies. It established computer links among its international offices during the 1980s and early 1990s, for example, allowing the company to efficiently integrate global accounting and currency efforts. The company also had implemented the use of advanced risk analysis software to help it accurately predict damage from natural catastrophes. The company had taken a leading role in the management of environmental risks as well, such as pollution and indoor air quality--an increasingly important sector of the industry in the 1990s.

In addition to its four-pronged management strategy, the company continued to achieve stability through market diversification following the KKR acquisition. The company began decreasing its reliance on conventional underwriting and investment revenues in the early 1990s, instead seeking profits from related fee services. By 1993, in fact, American Re Corporation's new subsidiaries were contributing a significant portion of earnings growth. Am-Re Services, Inc., for example, was established to provide clients with various reinsurance-related services. Likewise, Am-Re Brokers, Inc., provided client access to worldwide reinsurance resources. Similarly, the Becher + Carlson (B+C) subsidiary specialized in risk management consulting and brokerage for commercial and public entities. Finally, Am-Re Managers, Inc. provided a variety of underwriting and consulting services to noninsurance businesses.

KKR's acquisition of American Re began to pay off in 1993. Company assets grew from $5.89 billion in 1992 to more than $6.23 billion in 1993, a 5.5 percent increase. Total revenue climbed from $1.1 billion in 1992 to an impressive $1.4 billion in 1993, resulting in net 1993 earnings of $75 million. Although company growth slightly lagged behind some industry statistical averages for larger reinsurers, those figures failed to reflect American Re's stability and growth potential. For instance, the company's international division boosted its gross premiums 39 percent in 1993, to $279 million. Furthermore, American Re's debt was significantly reduced and its combined ratio improved a healthy three percentage points. Also in 1993 American Re went public, raising $413.5 million. Its stock traded on the New York Stock Exchange.

Going into the mid-1990s, American Re Corp. expected to continue to benefit most from overseas expansion and growth in fee services. The decline of competing European reinsurers, particularly Lloyd's of London, boded well for international gains. Furthermore, American Re was striving to establish itself in many fast-growth developing markets, such as Russia, China, and Eastern Europe. B+C, for example, secured a consulting contract in 1993 with one of Russia's largest companies, which was also one of the world's largest truck manufacturers. 'The new ownership will create an environment that will make it easier for us to work,' said Paul H. Inderbitzin, executive vice-president of American Re, in the September 16, 1992 issue of Business Central New Jersey. 'We will be aggressive in alternative markets ... there are no barriers for the future growth of our activities.'

In early 1995 American Re formed a joint venture with Arthur J. Gallagher & Co., a leading U.S. insurance brokerage firm. The new company, called Risk Management Partners Ltd., was based in the United Kingdom and was geared toward providing insurance and risk management services to local U.K. governmental agencies. Under terms of the agreement, American Re agreed to underwrite insurance coverage, while Arthur J. Gallagher agreed to provide risk management services through subsidiary Bassett Services, Inc.

American Re continued to enjoy success, as indicated by the company's results for the first quarter of 1996--reported net income of $49.1 million reflected an impressive 39.5 percent increase over net income during the comparable period a year earlier. In addition, net premiums written by the firm during the first quarter rose 18 percent compared with the same period in 1995.

Although American Re was a strong, profitable performer, talk of a possible sale began to circulate in the insurance industry in mid-1996. Two possible suitors included General Electric Co., and Munich Reinsurance Co. of Germany. Discussion of a sale was generated primarily following the acquisition of National Re Corp. by General Re Corp., which solidified General Re's leading position in the reinsurance market. As consolidation and competition within the reinsurance industry grew, so did speculation about acquisition candidates.

Initially, many were skeptical about the possible sale. KKR had owned American Re only since 1992, and KKR had been increasing its presence in the insurance industry. In 1995 KKR purchased Canadian General Insurance Group Ltd. and attempted to buy the property and casualty operations of Aetna Inc. In early 1996 KKR acquired the four property and casualty businesses of Talegen Holdings Inc. from Xerox Corp., paying about $2.7 billion. Selling American Re would not only lower KKR's earnings, but it would also lessen its authority in the insurance industry.

Skeptics turned out to be wrong, and in August of 1996 KKR announced that it was indeed open to offers for American Re, of which KKR owned 64.1 percent. Although Munich Re, the world's largest reinsurance company, contended early on that it was not interested in buying American Re, the company soon announced it would purchase the reinsurer for about $3.3 billion, or $65 a share. KKR, which paid $1.4 billion for American Re in 1992, stood to make a profit of $1.7 billion. The $3.3 billion was significantly more than American Re's market value, which hovered around $2.5 billion at the time of the announcement. KKR general partner Saul Fox explained the benefits of the sale to reporter Patricia Vowinkel, as published in the Chicago Sun-Times, and said, 'Given the rapid consolidation of the international insurance community, this transaction will allow American Re to continue as an industry leader, enhancing its ability to provide clients with both service and capacity. ... It is the right move at the right time for both companies, creating a larger, more formidable global competitor.' Munich Re greatly expanded its North American operations with the purchase. The company's North American market share of about 7.7 percent, which made it the seventh largest reinsurer in the United States, was significantly enhanced by American Re's share, which was about ten percent. American Re became a wholly owned subsidiary of Munich Re.

In 1997 Edward Noonan was named president and CEO of American Re, and Munich Re's American operations were merged with American Re's businesses. Restructuring commenced, and in June of 1998 the subsidiaries Becher + Carlson Companies, Am-Re Brokers, Inc., and ARB International Ltd., along with Munich Re's International Insurance consultants, were combined into Am-Re Global Services. Just a month later American Re established American Re Capital Markets, Inc., which focused on providing solutions to clients in financial markets. The business planned to start out concentrating on the weather derivatives market. In November American Re renamed its Am-Re Managers, Inc. division Munich-American RiskPartners to reflect its emphasis on globalization.

American Re continued its strategy to strengthen operations in 1999, and the firm's medical cost management program, known as American RePreferred, its alternative risk business, and its Am-Re Global Services division, among others, showed progress. In the summer American Re agreed to buy holding company American Insurance Service Inc., which owned United National Group of Companies, Inc., United National Insurance Co., Diamond State Insurance Co., and Hallmark Insurance Co.

Financial performance in 1999 was not as strong as American Re had hoped, with earnings negatively affected by catastrophic events and price competition within the industry. Although the value of gross premiums written rose from $3.1 billion in 1998 to about $3.5 billion in 1999, net income fell, from $226 million to a net loss of $101 million in 1999. Still, American Re voiced its confidence in future success. CEO Noonan wrote in the company's 1999 annual review, 'As part of the Munich Re Group, we make our living taking risk, and we believe there is a good future for those who do so prudently. Difficult times remind us of the great advantage in having a long-term approach to our partners.' American Re, with a history of stability stemming from a conservative investment and management approach, stood ready for the unpredictable future with confidence.

Principal Subsidiaries: Munich-American Risk Partners; Am-Re Global Services, Inc.

Principal Competitors: General Re Corp.; Reinsurance Group of America. Incorporated; General Cologne Re.

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