Jack Byrne has distinguished himself as one of the insurance industry's pre-eminent general managers, most creative turnaround experts and most productive capital managers. He began his fifty-five year insurance career at his father's agency in Wildwood, New Jersey where he remembers early family dinner discussions around such topics as "adverse reserve development." The die was cast. An actuary by training, he joined Lincoln National Life Insurance Company in 1959 as a reinsurance salesman and assistant manager. In 1966, after a few years at The Massachusetts Life Insurance Company, Byrne moved to Travelers Insurance Company, where he reached his stride, advancing rapidly through the executive ranks to become Executive Vice President, responsible for the Life and Personal Lines divisions. Then, in 1976, he was recruited to be the chief executive of GEICO, which was on the brink of insolvency. Following his storied success at GEICO, in 1985, in partnership with Warren Buffett, he again made insurance industry history with the IPO of Fireman's Fund Insurance Company, the largest U.S. IPO in history at that time. Following the sale of Fireman's Fund to Allianz in 1991, Jack built the remaining holding company into what is today White Mountains Insurance Group. Called 'the Babe Ruth of insurance' by Warren Buffett, Jack Byrne's contributions to the insurance industry are truly unparalleled.
- Byrne rescued GEICO from the brink of what was about to become the largest insolvency in the history of the U.S. insurance industry. Against long odds, he completed the rescue and turnaround in two years to create the current industry powerhouse.
- After its disastrous run for market share in the early 1980's, Byrne joined Fireman's Fund in 1985, solidified its balance sheet and rebuilt it into a solid company. He achieved a remarkable exit for its prior owner, American Express, while making history with the largest U.S. IPO of the time. Then, in 1991, Allianz purchased the insurance company, resulting in a more than $1 billion profit for Jack's shareholders.
- Following the rescues of both GEICO and Fireman's Fund, Jack's reputation as a savvy turnaround expert was sealed. He crafted White Mountains, the renamed Fireman's Fund holding company, into a successful acquirer and manager of troubled/unwanted insurance companies. Major activities included the IPO of Financial Security Assurance in 1994, the purchase of Folksamerica Re in 1996, the rescue of Esurance in 2000, the purchase and turnaround of CGU/OneBeacon in 2001, the purchase of Sirius International in 2004 and the founding and IPO of new companies including Mid-Ocean Re and Montpelier Re.
Impact of Achievements:
Jack Byrne has spent a lifetime building outstanding value for shareholders. He is a well known advocate that insurance companies must maintain adequate loss reserves and that actuaries have a duty to make it happen-and he led by example. He was also an unparalleled motivator of managers and employees, and he rewarded them handsomely when they generated outstanding business results. Thousands of employees have enjoyed successful and rewarding careers as part of Jack's tireless search for performance.
The GEICO Story
The formerly vibrant and profitable Government Employees Insurance Company had fallen on hard times by the mid-1970's. GEICO, in Jack Byrne's own words, "lived close to the edge, growing fast and keeping prices low". Yet the challenging environment in the 1970's, gasoline shortages, new and untried no-fault automobile laws (some with mandated rate reductions), the great price freeze and skyrocketing inflation took its toll on GEICO. In 1975, the company had its first loss in 36 years - a whopper - $126 million. The situation rapidly deteriorated into a crisis. Capital and surplus were seriously depleted. The Washington, DC insurance commissioner was poised to declare insolvency.
When Jack Byrne was pondering whether to join GEICO to help lead it back to health, he assembled a team of experts and quickly pored over its finances. His conclusion was that GEICO's original recipe for success (spelled out by its founder Leo Goodwin) was as sound as ever. Jack believed the company could be saved if urgent management action was taken. So, in May 1976, he accepted the challenge and designed a three-part program to restore financial health. A case study for any business recovery, the turnaround program included:
- Operation Bootstrap: Immediate, drastic, emergency action to improve financial results from operations - tough but necessary. Those steps included rate increases, vigorous cost controls, reductions in workforce, closure of some offices, and completely re-underwriting the entire book of business. According to Warren Buffett, who was an investor in GEICO, "GEICO had been a fear-ridden, directionless organization but was quickly transformed into a cohesive, purposeful and confident group under Byrne's leadership."
- Reinsurance Relief: a plan to obtain temporary relief through a reinsurance plan with other insurance companies.
- Additional Capital: The need for an infusion of capital was obvious, and Byrne sought out Salomon Brothers for assistance to offer a firm underwriting of an issue of $76 million in convertible preferred stock under a rights offering.
Jack Byrne, again in his words, "The interlocking puzzle of constituents we had to bring together was staggering. The greatest challenge was the human element. We had to sell, persuade, negotiate, pressure and flatter - all in a period when we had negative press coverage. It was an intricate, sensitive series of small victories which finally made it all work. But, bit by bit, we succeeded."
In the end, the insurance industry itself (27 companies) agreed to come to GEICO's rescue through participation in a reinsurance plan, recognizing that the free enterprise system would be better served by the company's recovery than by its demise. The participants all prospered - the reinsurance treaty realized good profits at its termination, and many of them bought GEICO's new stock issue which soared.
At the end of 1976, the company had approximately $137 million in capital - enough to move ahead.
"It was a great, socially responsible victory for private capital, for free enterprise and for enlightened grass roots regulation," said Jack Byrne. In three years after the crisis, the company developed a profit of over $220 million. At year end 1976, the surplus for the protection of policyholders topped $250 million, its highest point in the company's then 43-year history.
Over time, GEICO's share price rose from the $2.25 of 1976 to more than $300 (split adjusted), rewarding those investors who had kept the faith. Warren Buffett, who as an early believer had bought about half the company for $45 million, purchased the other half in 1996 for $2.3 billion.
The Fireman's Fund Story
Warren Buffett, in honoring Jack Byrne for his accomplishments at GEICO, once said that as impressive as his accomplishments had been, he thought Jack was "just beginning to get warmed up. He has that rare combination of the ability to strategize and dream of companies for the future while exercising day to day discipline needed to make the business perform at 100% potential."
Indeed, Jack Byrne was getting warmed up. In 1985, he again made insurance industry history with the largest IPO of the time, the IPO of Fireman's Fund Insurance Co. He entered this new challenge with the diligence and dispatch that were his trademarks. He put Fireman's Fund back on its feet following an attempt to grow market share that led to serious underwriting losses. He fixed the balance sheet by increasing reserves, focused the investment operations on total return rather than income, and returned the company to its former underwriting culture.
Fireman's Fund's recovery to profitability under his guidance placed the company in an ideal position to attract a major player in the international marketplace, the Allianz Insurance Company of Germany, the world's largest insurance company at the time. In 1991, Allianz purchased Fireman's Fund. Jack Byrne's entrepreneurial abilities again produced significant value for shareholders, including employees who benefited through the Employee Stock Ownership Plan.
The White Mountains Story
Following the sale of Fireman's Fund, the holding company retained a separate identity, first known as Fund American and now as White Mountains Insurance Group, a Bermuda company with executive offices in New Hampshire. It is traded on the New York Stock Exchange.
White Mountains has a rare track record of creating value through the ups and downs of the cyclical property-casualty insurance business. Much of the company's success is derived from its innovative management of insurance capital and invested assets. Jack's disciplined focus on total return over many years has generally produced greater shareholder returns than have the yield maximization strategies often employed by insurance competitors. At GEICO, Fireman's Fund and White Mountains, respectively, Jack hired Lou Simpson, Bob Bruce and John Gillespie as chief investment officers, giving them broad authority to create value over time without short term benchmark constraints usually imposed on investment departments. All three are well known, successful value investors.
Jack Byrne was also a pioneer in using capital management, especially share repurchases, as a powerful tool to further enhance shareholder returns. From 1976 to 1995, GEICO repurchased about one-third of its outstanding common shares. At Fireman's Fund/White Mountains, from 1985 to 1999, share repurchases reduced total shares outstanding from 67 million to about five million. All of these repurchases were made at values which were fair to departing owners, but also substantially increased per share value to remaining owners over time.
On the insurance front, this disciplined capital management focus results in an opportunistic and often contrarian view of the business. In 1994, when the commercial real estate market adversely impacted the bond guaranty business, White Mountains invested in Financial Security Assurance and helped the company prosper. In 1996, when Folksamerica Re needed new owners to support its growth opportunities, White Mountains invested and took the first step in building what is now White Mountains Re, a significant global reinsurer. In 2000, when much of the venture money abandoned the Internet-based insurance start-ups, White Mountains purchased Esurance and turned it into the fastest growing insurance company in America. In 2001, when Aviva/CGNU wanted to exit the U.S. property/casualty insurance business and there were no takers, White Mountains purchased the company and turned OneBeacon into a successful regional/specialty carrier. Many more transactions contributed to make what White Mountains is today. Jack continued to serve the company until he fully retired in 2007.
Jack is a widely quoted authority on the insurance industry, business in general and corporate governance. He has served on many boards of directors including White Mountains, American Express, Martin Marietta, Lehman Brothers, Financial Security Assurance, and Montpelier Re.