It’s hard to imagine an executive describing his company and its peers in the industry as “cigar butt companies where the butt had been dropped in toxic nuclear sludge, [and] rolled in asbestos…”
Executive Summary
In a two-part article that’s part book review and part interview with the CEO of a specialty insurance group that survived the liability insurance crisis of the late 1980s—and the 200-plus combined ratios it produced—C&F CEO Marc Adee provides key lessons of the 200-year journey to become the long-term decentralized diversified specialty insurer.
CM Editor Susanne Sclafane spoke actuary-to-actuary and writer-to-writer to Adee about the book he wrote about his company’s history and the lessons for generations to come.
Part 2: How a Decentralized Structure Opens Career Paths at C&F
Marc Adee, the chief executive officer of Crum & Forster, does just that in one of the most memorable passages from a book he wrote about the history of his company, “The Once and Future C&F.”
The analogy comes in Chapter 5 of a six-chapter, 82-page book in which Adee recounts details of what would ultimately begin the best chapters in history of the 200-year-old company. Titled “Fair and Friendly,” Chapter 5 describes a pivotal point on C&F’s road to redemption after being battered during the liability insurance crisis of the late 1980s: the 1998 acquisition by Fairfax Financial for $680 million in 1998, and the long-term vision of Fairfax founder Prem Watsa.
“Prem is a value investor in the school of Ben Graham, who famously recommended buying cigar butt companies ([Graham’s] analogy for finding value in seemingly unattractive situations). A better analogy for P/C insurance companies in the late 1990s would have been cigar butt companies where the butt had been dropped in toxic nuclear sludge, rolled in asbestos, then stepped on a couple of times for good measure. Consequently, Fairfax acquired a few clunkers.”
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