Apr 2009 Financial News

Meet Jeff Mack…at the helm of Guardian Holdings Ltd

Apr 23, 2009

Guardian Holding Ltd’s (GHL) share buyback programme is in hiatus.
Since the announcement of the programme to buy back four per cent of the company’s issued stock—8,091,221 shares—at prevailing prices, GHL has only purchased 75,861 shares, in the process spending $1,528,604.26. “It’s not that the company hasn’t been buying back shares in the last three weeks, but just that it wasn’t pursuing it aggressively. We look at it every day,” said Jeff Mack, the newly appointed chief executive officer of GHL.

GHL chairman Arthur Lok Jack announced the share buyback programme on February 18 to boost the value of the company’s shares on the T&T Stock Exchange. The company’s efforts to speed up the acquisition of the shares has been thwarted by the Securities and Exchange Commission’s (SEC) rule which limits its daily share purchases to 8,429. Mack said GHL is working with the SEC to “get these limits lifted. “Until we get to that point, we’re just not being very aggressive in the marketplace,” said Mack, an insurance executive originally from Buffalo, New York, who assumed the helm of GHL on January 1.

“I know they have had discussions at the board level. I would hope that they are going to be able to work with us to lift that. I believe it is a board level decision, as I understand the situation. “I think that within, I have gotten indications from the SEC that in the next couple of months, they should be able to get to look towards lifting those restrictions,” said Mack, 50. The programme was scheduled to run until August 2009. Asked if GHL had a Plan B if the SEC’s limit was not increased or lifted, Mack said it did not. He said GHL executive management thought the buyback programme was a good use of its capital.

“A share buyback programme is a relative capital decision. Do I invest capital and buy back shares or do I invest capital elsewhere in the business? “What’s happened in other parts of your business and other opportunities is that as the financial crisis has dropped valuations of companies, companies that were very expensive in terms of potential acquisitions have now gotten to be a bit more attractive,” said Mack in an interview last week Wednesday at GHL’s Westmoorings headoffice. He said that he was headhunted for the GHL job and came to Trinidad four times before he accepted the offer which had been made to him by Lok Jack and Ganteaume.

“The environment is constantly changing, so when we get to the end of this buyback programme, there may be much better opportunities for product capital use than buying back our shares,” Mack said. Wainwright Iton, general manager of the T&T Stock Exchange, said on Tuesday that the regulatory authority is not the TTSE, but the SEC.

Flight to quality

“We administer SEC guidelines,” Iton said. “It is for the SEC to give GHL relief if relief is to be had,” said Iton, adding that he can’t see the “relevance and importance” of having a daily restriction on how many of its own shares a company can purchase. The Business Guardian was originally scheduled to interview Mack on January 30, 2009. The appointment clashed with Central Bank Governor, Ewart Williams’ press conference to announce the Government’s intervention in the CL Financial Group to bail out the cash-strapped Lawrence Duprey-owned Colonial Insurance Company Ltd (Clico), British American Insurance Company Ltd, Caribbean Money Market Brokers Ltd (CMMB) and Clico Investment Bank (CIB). He said Clico was second to GHL in the life insurance business in T&T.

“In T&T, they have more than 38 per cent market share in life, health and pension. As a matter of fact, we sell more life insurance than all other competitors combined.” Asked if Clico’s troubles have given GHL an advantage in the marketplace, Mack paused for several seconds, then said: “We’ve been very conscious to try and be good corporate citizens and adhere to the Central Bank’s request that competitors don’t try and take advantage of the situation. “It’s important for the country, important for the region, important for the employees and the policyholders, for all the stakeholders involved, that the franchise survives,” Mack said. Despite that diplomacy, he allowed that there had been “a certain flight to quality. “I think the Clico brand has been tarnished.”

“I think people are probably a little bit concerned about if they are a policyholder, the steps that the Government here has taken has probably assured them and given them some assurances that they are okay, but I think if you are a policyholder that is looking to purchase a new policy, whether you are a trustee for a pension scheme, or someone looking to buy a long-term insurance contract, clearly what we have seen is those types of decision-makers have given a lot of thought about security,” Mack said.
“Obviously, I think at this point Guardian offers a little bit more security than our competitor.” He said that at the time Clico’s troubles became public, policyholders had concerns about whether GHL had similar problems.

Mack said GHL chairman, Lok Jack, and Ganteaume met on how to treat with policyholders’ concerns and embarked on a series of interviews to get the message out that while the Clico issue shook the region, “Guardian is strong. We don’t have that same issue; we didn’t have that same business model.” He said that business has been normal since and there were no “requests for redemptions. “I am happy to report that in the intervening time, if anything, we’ve probably gained business from the situation. There has been a flight to quality towards Guardian.” He did not put a value on the business Guardian attracted away from Clico. “We haven’t quantified it. I won’t say it’s huge in terms of material movements. We’ve had some pension scheme trustees make inquiries: they’re with Clico now, is that a good thing or not?”

About Mack

Jeff Mack joined the Providence Washington Insurance Group in May 2004 as president and chief executive officer of its four insurance companies: Providence Washington Insurance Company, York Insurance Company, American Concept Insurance Company, and Providence Washington Insurance Company, New York. He simultaneously served as chairman of the board of the insurance company’s parent organisation, PW Acquisition I, LLC, and the four insurance companies at a time when the insurance companies were in great turmoil. Shareholders’ equity had fallen from US$105 million in 2001 to US$48 million by the end of 2003 due to over expansion and under reserving. Outstanding debt at the holding company level stood at over US$70 million. Mack’s job was to stabilise the company and develop strategic plans to either recapitalise the company or sell it.

It was decided to reorganise the company while placing it into a self-administered run-off: it stopped writing new business, restricting itself to servicing claims. Costs were drastically cut. Six branch offices were closed. The staff was reduced by 80 per cent. By the end of 2004, shareholders’ equity, due to one-off restructuring charges and additional reserve strengthening, was US$27 million. Between 2004-2005, Mack approached a number of potential strategic partners and private equity providers. Given the complex capital issues of the holding company and the uncertainty surrounding the company’s loss reserves, no one was able to offer the majority shareholder commercially viable terms.

Mark changed tack and, with the blessing of the majority shareholder, initiated a management buyout. The plan? Transform the company from an underwriting company to a third party insurance service provider, specialising in insurance claims adjusting, and run-off management, by leveraging the company’s core skill set. Mack, together with a large private equity firm and a local insurance executive, conceived a plan that the insurance regulator accepted for the transfer of control of the company to the management buyout team, and negotiated a sale of the company with the majority shareholder. Terms of the sale: purchase of all of the common stock of the insurance company, assuming the holding company’s debt, which had grown to more than US$80 million.

Concurrent with the closing sale, Providence Washington Insurance Solutions, LLC (PWIS) was established as a third party claims administrator. Its first contract was the continued management of Providence Washington Insurance Group’s run-off. The former insurance companies’ employees were now working for PWIS. Mack developed a plan to restructure and recapitalise the insurance company’s holding company debt to relieve any potential threat of bankruptcy. According to Mack’s resume, the Providence Washington Insurance Group is returning to financial health. Since the insurance companies were placed into run-off, shareholders’ equity grew more than 50 per cent. Loss reserves were stabilised. “The majority of the holding company’s debt is now controlled by Mack and his partner, and the threat of bankruptcy has been removed,” his CV stated.

Swiss Reinsurance

For the 18 years prior to joining Providence Washington, Mack worked for Swiss Reinsurance. He was managing director and chief operating officer of Swiss Re’s Financial Service Business Group (FSBG) in Zurich, Switzerland. When he left, the company had US$3.5 billion in revenue. FSBG’s business included direct property and casualty, aviation, and credit insurance, structured finance products, private equity investment, third party asset management, investment banking, and a securities broker/dealer.

In 1997, Mack was named managing director of Swiss Re New Markets where he was an executive team member and later, chief operating officer. Other past board participations include Swiss Re Capital Markets, Japan, and Swiss Re Capital Markets, UK, as well as Swiss Re Financial Services, Barbados. Mack, who is fluent in German, started his insurance career as a management trainee at Crum & Forster Insurance Company in 1980. Mack has a communications degree and a MBA in finance from Fordham University. He also has a chartered property and casualty underwriting (CPCU) degree.


Source:
Trinidad Guardian
Thursday April 23, 2009

http://guardian.co.tt/business/business-guardian/2009/04/22/meet-jeff-mack