A vision that has taken it to the top
Within the space of just a few decades, HLR America has become one of the USA’s most profitable life and health reinsurers. As well as covering life and health insurance, the company focuses on financial solutions – with considerable success.
Orlando in the US state of Florida is not exactly the kind of place where you would expect to find one of the largest life and health reinsurers in the USA. The city is more closely associated with tourism than with big business. “Walt Disney World”, “Sea World”, “Universal Studios”: around 20 theme parks draw many millions of tourists to Orlando every year. The permanent beach weather also plays a part, ensuring there is no month in which Florida’s beaches are left deserted.
Even the centre of Orlando does not resemble a typical US business district. Universities and the burgeoning IT sector attract students and career starters. Bars and restaurants in the central “Church District” are full of young people in the evenings. Over their heads towers the “Suntrust Center”, Orlando’s highest building at 134 metres. Hannover Life Reassurance Company of America (HLR America), one of the USA’s largest life and health reinsurers, has been based on the 18th and 19th floors of this building for about a year. 125 employees of the Hannover Re subsidiary work here, with over 140 more based in Denver/Colorado, Charlotte/North Carolina – and also in New York, the dream location of every global corporation – or is it? Curt Hagelman chuckles. The Senior Vice President and Chief Marketing Officer, like all his colleagues at HLR America, regards Orlando as New York’s equal when it comes to big business: “Reliability is a core value in our industry,” Hagelman emphasises. And the company already had its head office in Orlando before it was acquired by Hannover Re in 1990.
» Reliability is a core value in our industry. « SAYS CURT HAGELMAN
“The skyscrapers of Manhattan might offer a better panorama than the Suntrust Center. But it’s not the view from the window that matters in our business – it’s the insight we get from studies and statistics,” says Curt Hagelman, who has worked in insurance since 1978. He gained experience as an underwriting and actuarial manager for many years before taking over responsibility for HLR America’s marketing department.
The reinsurance business functions according to the law of big numbers. Reinsurers cover insurance portfolios for primary insurers, often with tens of thousands of policyholders. The reinsurer is confident that it will earn more in the coming decades from the portfolio it has taken over than it will have to pay out. If everything goes as predicted, the plans will work out. If an unexpectedly high number of medical claims, cancellations or deaths occur, it will have to pay up. “The successful company will be the one with a better forecast,” says Hagelman. “Which means the one with better data available and better people to calculate risks”.
It’s a complex business, in which HLR America has worked its way up from being a challenger to joining the ranks of the major players. After entering the US market in 1990, the Hannover Re subsidiary, which at that time still operated under the name Reassurance Company of Hannover (RCH), was mainly involved in reinsuring substandard risks and individual risks in international life business. With a customer base of 20 companies and a licence only for the south-eastern US states, it was a relatively small company.
»The successful company will be the one with a better forecast. « SAYS CURT HAGELMAN
Only after the company began to underwrite life insurance in the senior market as a niche business in 1994 did the figures tentatively start to rise. Business really took off after the turn of the millennium, when HLR America began focusing on financial solutions as well as life and health reinsurance. Between 2005 and 2013, gross premium rose from USD 645 million to USD 2.5 billion. Client awareness in the market has also grown. In 2013, the market research institute “Flaspöhler” awarded the company the title #3 “best reinsurer in the US” (up from eigth place in 2009).
One of the company’s most important steps in reaching its current size was the acquisition of the Scottish Re Group’s individual life insurance business in early 2009, instantly more than doubling HLR America’s premium volume and number of staff. “But size alone isn’t a guarantee of success,” Hagelman emphasises. To ensure that a portfolio does not become a drain on the company’s funds years later, it is important to assess accurately the risk of illness, cancellations and early deaths in the portfolio. “As part of a globally operating reinsurer, Hannover Re, we have access to excellent data, which helps us to make accurate forecasts”, Hagelman says. Although records from one country cannot simply be used to calculate risks in another country, discussions among experts regarding the numerous data sources promote understanding of the complex material. “This allows us to minimise risk effectively and optimise earnings.”
- In 2013, HLR America supported the American Cancer Society (ACS), which is involved in cancer research and care for cancer patients, along with other social initiatives.
- USD 38,000 alone was collected from the “Jeans-to-Work” scheme, where employees are invited to wear their jeans to the office each day in exchange for a donation of USD 20 from their monthly salary.
The company now distinguishes between two major areas of business, “Risk Solutions”, i. e. life and health risk reinsurance, and “Financial Solutions”, involving reinsurance solutions that focus on the impact a reinsurance contract has on the balance sheet, as well as the issue of risk transfer. In this growing segment, HLR America is now seen as a market leader in providing customised solutions to its clients. “International reinsurers have been highly specialised financial service providers for a long time,” Hagelman says. “Compared with solutions from other financial service providers, however, there is always a transfer of risk involved, which means there is a connection with the future performance of the covered portfolio. This is an advantage for the primary insurer, as benefits and repayment are in line with financing requirements and future profits.”
»As part of a globally operating reinsurer, Hannover Re, we have access to excellent data. « SAYS CURT HAGELMAN
Risk business remains difficult in the USA. Individuals working for small and medium-sized enterprises in particular are chronically underinsured. Around 45% of people with an annual income of between USD 25,000 and USD 60,000 have no life insurance at all. “We’re talking about many millions of people here,” says Curt Hagelman. This trend has intensified in recent years. One reason is declining policy yields as a result of generally low interest rates. Another is delays in family planning: US citizens too are marrying later and later and are rarely interested in life insurance while they are single. At the same time they are growing older, which actually makes insurance more important. The average age of US citizens was around 33 years in 1990; it has already risen to 37.3 years and, according to estimates, will increase to 40 years by 2030.
»The problem is that many people don’t think about life insurance until it’s quite expensive to get it. « SAYS CURT HAGELMAN
“The problem is that many people don’t think about life insurance until it’s quite expensive to get it,” Hagelman says. As a life and health reinsurer, HLR America does not sell insurance to consumers. However, its business depends on how primary insurers perform in acquiring new customers. “People recognise the benefits of having insurance,” Hagelman says. “But providing efficient access with appropriate products becomes key.”
Two tools that HLR America has developed to support primary insurers in gaining customers can provide help. “MERICA” is a system that allows policies to be approved realtime at the policyholder’s premises, avoiding the need for tedious correspondence and additional costs. It is used when the applicant has no major medical conditions. Another system, “ASCENT”, is used by primary insurers’ risk assessors to carry out extensive medical assessments. In addition to MERICA and ASCENT, HLR America wants to expand its marketing and use of additional analytical tools and develop services for primary insurers. Studies have shown that the insurance market will in future also be accessed online. “If we want to continue to be successful, insurers will need to approach young people in a more targeted way,” highlights Hagelman.
The centre of Orlando turns out to be the ideal company head office location for this plan. If marketing strategist Curt Hagelman wants to study his young target group, he only has to go outside the “Suntrust Center”, and he will find it in the “Church District”.
Term life insurance in Germany and the USA
Not all insurance is the same, something that international insurers know only too well. The differences between countries can be vast.
One example of this is term life insurance in Germany and the USA. While in Germany, a single set of rules applies to this form of insurance, the situation in the USA is unclear, with regulations varying from one state to the next and overseen by separate supervisory bodies in each case.
There are also differences with regard to risk assessment. Insurers in the USA have access to numerous databases to enable them to assess the risk associated with a customer. These access options are limited in Germany.
While premiums in the USA are comparatively low and profit-sharing is not possible, the sums insured are generally high – USD 1 million is not unusual. The average sum insured in Germany is just EUR 90,000, while premiums and profit-sharing are comparatively high.