Order Reprints

Fremont Michigan InsuraCorp President and CEO Richard Dunning, left, and VP of Finance Kevin Kaastra, right, said the company has made strategic investments — based on agent feedback — to grow the business over the last five years. PHOTO: JOE BOOMGAARD

Fremont Insurance succeeds in markets national carriers ignore

By Joe Boomgaard | MiBiz
This e-mail address is being protected from spambots. You need JavaScript enabled to view it

FREMONT — Rural communities aren’t often the targets for insurance companies looking for the masses available in urban population centers, but that’s fine with Fremont Michigan Insuracorp Inc. The company has done good business by targeting residents and businesses in small town Michigan.

“Small to mid-sized communities is where we do best,” Richard Dunning, president and CEO of Fremont Insurance, told MiBiz. “The metro areas are where all of our competitors focus where they have agencies with 30-40 producers. We do well in the towns like Fremont, Casnovia, Gaylord and Traverse City.”

Kevin Kaastra, VP of finance at Fremont Insurance, said some of the national companies require an agent write a half million dollars worth of business just to be able to sell that particular company’s insurance.

“That type of attitude doesn’t sit well with agents, and that’s great for Fremont,” he said.

While the company has certainly had a couple of snags in the last year — including a well-publicized hostile takeover attempt — the company has been successful in growing even amid a stagnant Michigan economy and appears on its way to achieve strategic growth targets.

In 2009 amid a troubling economy, the company posted record revenues of $56.9 million, an increase of over 13 percent from 2008. Net income was up 14.4 percent from 2008 to $2.38 per diluted share. In the first quarter of 2010, reported revenues of $14.9 million were up more than 9 percent from the same quarter last year. Fremont experienced a 270-percent growth in net income in a year-to-year first quarter comparison.

The company wants to write $100 million in direct premiums by 2013. It wrote nearly $66.9 million in 2009, up 9.8 percent from the year before.

“We’re right on track. Our plans are a little ahead of where they needed to be,” Dunning said, noting the growth will mostly come by adding more agencies. “We’re constantly looking for high quality agencies to fill voids we may have in the state. It’s basically getting a larger percentage of the pie in an agency.”

While Fremont’s business certainly isn’t saturated in West Michigan and the Upper Peninsula, the company needs to look at spreading out its risk along a broader geographic area to garner higher ratings from analysts. The push for the company to get approval to do business in Wisconsin and Indiana will help in that regard, they said, but that move was more a factor of helping agents in those state border communities to expand the geography that they can serve.

“We’ve got agents on the borders that can only service about 50 percent of their geography, or half of their potential contacts,” Kaastra said.
Dunning said that while Fremont has been able to grow, Michigan’s economy has held back the company’s rating, which was recently upgraded to an A-.

“We’ve had the financials for an upgrade two years ago…(but) with everything happening in Michigan and the auto industry, and seeing as how we’re operating in a challenging economy, that has held us back from a ratings standpoint,” Dunning said. “In business growth, we’ve done extremely well. When you look at the competition doing business in Michigan on comparative basis, they’re flat, slightly negative or maybe slightly positive, but we’ve had double-digit growth. That ties back to the relationship with our agents that allows that to happen.”

One of the key determining factors in that relationship is rate consistency. Agents don’t like to be hit with large rate increases, which places the importance on the actuarial role within the company.

“The thing about our industry versus a manufacturer making a widget is that when we sell a homeowners policy for $500, we don’t know what the cost will be, so we need to do a good job of pricing analysis,” Kaastra said.

Currently, Fremont does about 65 percent of its business in personal insurance, with commercial taking about 15 percent and the remaining 20 percent split between farm and marine. Ideally, the personal and commercial segments would be about equal, and the company is working to address that by expanding the various commercial premiums it offers, Kaastra said.

“It’s difficult to grow the commercial side in Michigan when so many businesses have left the state,” Dunning said, the competition among the insurance companies for the remaining businesses is very steep.

Still, the company has managed to increase its personal insurance sales as customers have left larger companies, or the larger companies pulled out of various regions. A critical piece in that trend was the investment about five years ago in better technological offerings to agents and clients. Another help, according to Kaastra, has been Fremont’s aligning with the Pure Michigan brand, a move which has garnered it some business from people looking to do business with Michigan-based companies.

“You’ve got to listen to your customers,” Dunning said. “They’ll tell you what they need to have.”

And so it was a bit of a shock for the company to receive notice last year that the parent company of the Steak ’n Shake restaurant chain based in Texas was attempting a hostile takeover, the first such attempt since Fremont went public in 2004. Fremont’s board rejected the offer, but the Michigan Office of Finance and Insurance Regulation is still reviewing the purchase offer. Dunning said he trusts OFIR will make a thorough evaluation.

“They will do their due diligence,” he said. “When we go through an audit (with OFIR), they send a team in here for six or seven weeks, so I can imagine, when a hamburger company tries to acquire an insurance company, they’re going to ask what do you know about insurance, what’s your intent?”

The company was left open to the takeover when the Michigan Control Shares Act of 1998 was abolished in 2009. The act mandated certain provisions be met when an outside company attempted to acquire more than 10 percent or more of another company’s shares. Public Act 61 of 2010 gave back some of that protection.