Cast of Characters, in order of appearance
- John Davidson — Protagonist, CEO of Wonderful Life
- Peter Farell — Chief Investment Officer for Mega Insurance, the holding company for all of the operating subsidiaries.
- Brent Fowler — CEO of Whata Life
- Henry Goldsmith — CEO of Mega’s P&C reinsurance subsidiary
- Marc Blitztein — CEO of Mega’s domestic P&C insurance
- Brad Baldwin — CEO of Mega Insurance
- Stan Bullard — Scion of the family that owns Mega
- Caleb Matmo — Runs a firm that analyzes insurance financial statements, consulting for Mega
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John was the first to make it to the Men’s room. Finding the most distant stall, he bolted the door, and said to himself, “This is what you get for having too much tea.” Not long after that thought, he heard the bathroom door open, hearing the voices of Brent Fowler and Henry Goldsmith.
HG: I don’t know how you do it, Brent. Isn’t life insurance supposed to be a slow growing business?
BF: If you motivate your sales force effectively, life insurance can be a growth business. There are always ways to sell policies and add assets effectively if you just spot the opportunities and seize them. v I have a motivated sales cuture that thrives on the challenge of doing more — beating our prior best performance!
HG: I get it, Brent. But what if underwriting suffers? In my end of the insurance business, fast growth and bad underwriting go hand-in-hand.
BF: We watch our underwriting carefully. Our agents are our first line of defense in underwriting.
HG: But how do they balance the objectives of growth and safety? — that seems tough, particularly with long-dated contracts. Mine are short, so I don’t have to worry so much.
BF: That balance is one of my secrets, and why I have done so well….
The voices trailed as they left, to be replaced by the voices of Marc Blitztein and Peter Farrell.
PF: Your simple investment needs are a plus for you in this environment.
MB: Thanks, but what of the rest? How is John doing?
PF: John? God bless him, he’s the responsible one. He pulled in his horns, hurting immediate profitability before the crisis began. Brent, on the other hand, continued to be a yield hog. I can’t tell you how big his current unrealized capital loss is, but he is stubbornly focused on current income, because his bonus is largely based on that. John’s bonus is the same, but he cared more about the long-term safety of the company.
MB: That’s John alright… they don’t make many like him, and I hope he survives this.
PF: Me too… I really like his style.
Their voices drifted off. John wondered if he should leave, when he heard three more voices — Stan Bullard, Caleb Matmo, and Brad Baldwin. John thought, “Grand Central Station…”
BB: I appreciate your work, Mr. Matmo.
SB: And I as well. For a relative neophyte like me, you have made our decisionmaking process clearer.
CM: Thank you both. I have simply tried to think like a businessman, and analyze the need for free cash flow, which is often obscured in insurance organizations.
BB: You have made it clear to me.
SB: And me as well, though it is a pity that we will have to eliminate one of our life companies and merge it into the survivor.
CM: We must focus on the risk-adjusted growth of free cash flow. That is the lifeblood of our business, and with out that companies die.
As they exited the Men’s room, John left the stall, thinking, “I do not know what is going on, but if I am going out, I am going out with the flags flying. I have done my best for this firm; I have nothing to be ashamed of.” He washed his hands, and returned to the conference room.
