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Business Observer Thursday, Apr. 16, 2009 13 years ago

Homegrown Success: A Special Report on FCCI

Over the past 50 years, a tiny Sarasota insurance fund has become an industry power. Its simple motto: Do what it says it's going to do.
by: Mark Gordon Managing Editor

Over the past 50 years, a tiny Sarasota insurance fund has become an industry power. Its simple motto: Do what it says it's going to do.

When Gilbert Waters returned home from the Korean War in 1954, he wanted to follow his passion and write for his hometown newspaper in Sarasota.

The Yale graduate was going to change the world, one story at a time.

Waters' dad, however, had different ideas. The elder Waters wanted his son to work for a local insurance agency, so he could change his wallet, one paycheck at a time.

Waters, saying he would rather die than work in insurance, initially passed on that plan.

Nonetheless, insurance was to become one of the shining lights of Waters' distinguished business career. He would soon play a key founding role in what is now FCCI Insurance Group, a Sarasota-based insurance company that turns 50 years old this month.

The company, based in a 260,000-square-foot hurricane-fortified building in a Lakewood Ranch corporate park, has grown from a local, single-product self-insured workers' compensation fund to one of the largest commercial property and casualty insurance firms in the Southeast United States. And it has done it through a delicate combination of being conservative, yet ambitious about new acquisitions; and folksy yet fanatical about doing the right thing for its clients.

In addition to growing its policies, revenues and asset base, FCCI has also grown into a lofty position on the short list of homegrown companies that are near-unanimously well thought of in Sarasota business circles.

“It's a privilege to do business with them,” says Donnie McDonough, a Sarasota native whose family-owned plumbing operation has been an FCCI client since 1959. “I can't tell you the number of times FCCI has gone to bat for us.”

FCCI, which originally stood for Florida Contractors and Construction Industries, doesn't carry any homeowners' insurance policies. It also doesn't have any inside sales agents, instead selling its products through a host of partner agents and agencies.

The company's revenues, mirroring the national economy, dropped to $511.91 million in 2008 — down 8% from $559.15 million in 2007 revenues. But from a 10-year perspective, the company's revenues are up more than 100%, from when it was a $250 million company in the late 1990s.

Other nuggets in the company's recent financials, such as a 15% drop in net income in 2007, show telltale signs of being mired in a recession with the rest of the country. In fact, in January 2008, FCCI President and Chief Executive G.W.
Jacobs warned his top lieutenants that the year to come promised to be one they would never forget, due to the financial upheaval.

In October, in the midst of the credit crunch and on the cusp of the Wall Street meltdown, Jacobs said he was relieved, however, that the company's downturn wasn't too bad when compared against the backdrop of the national scene. One of his proudest accomplishments was that FCCI hadn't laid off any employees due to the downturn, a fact that holds true through the first three months of 2009.

“This has been a year when a lot of things have happened that we didn't expect to happen,” Jacobs said in an October interview. “And it's the ones that you don't anticipate that could kill you.”

Crisis response
Instead of that outcome, Jacobs and other FCCI executives and board members are confident the company has the wherewithal and business sense to last another 50 years. For starters, its first 50 years are dotted with milestones and successes few other companies in the region can match.

Among FCCI's accomplishments and accolades over the past 50 years:
• The company grew from $120,000 in premiums and 46 clients in 1968 to $24 million in premiums and 1,500 clients by the end of the 1970s.
• It built two company headquarters in Sarasota, the first of which went up in 1987 — a 72,000-square-foot, five-story office complex spread over 13 acres on Cattlemen Road. It moved into its current headquarters on University Parkway in Lakewood Ranch in 2003.
• It became a mutual insurance company in 1993, to diversify its product line and as a response to changes Florida legislators made to the workers' compensation industry. The company has since grown to serve 16,000 policyholders in 14 contiguous states, from Florida to as far north as Michigan and as far west as Missouri and Louisiana.
• Its Southeast regional office, which covers states such as Alabama, Georgia and North Carolina, surpassed $100 million in premiums by 2006, only six years after it was founded.
• It passed $1 billion in cash and cash equivalents in 2006.
• It was named as a business Hall of Fame company in 2006 by the Economic Development Corp. of Sarasota County. The EDC cited the company's in-house cafe and its policy of paying the full salaries of its active military employees when they are called into duty.
• Its A- (Excellent) rating was reaffirmed in 2007 by A.M. Best Co., one of the oldest and most widely recognized rating authorities in the insurance industry.
• It has increased its premium revenue per employee 116% since 2000, from about $380,000 to $820,000 per employee. In 2000, it had about 650 employees, while today it has about 685.
• Its $559.15 million in 2007 revenues earned it the 38th spot on the Gulf Coast Business Review's 2008 list of the regions largest companies. FCCI was also ranked as the 48th largest private company in the state by Florida Trend magazine in 2008, a ranking likewise based on 2007 revenues;
• It has built up a stable of 400 partner agencies and 3,500 agents.

While the statistics are nice, to McDonough, the longtime FCCI friend and client, the company's story can be told through its response to a crisis — the mark of any good insurance company. For example, there was the time in 2004 when
Hurricane Charley decimated a W.F. McDonough Plumbing supply store and office in Port Charlotte.

It was so bad, recalls McDonough, that bathtubs from the store were laying about U.S. 41. But FCCI's claims adjusters, McDonough says, were Johnny on the spot. They helped us put up portables the next day.”

Not just Johnny, but Jacobs, too: McDonough says seeing the company CEO in person on the scene, asking what he could do to help, cemented FCCI in his mind as a top-tier company.

Adds McDonough, whose company also owns Bradenton-based Wyman Plumbing: “I get that sort of service from them all the time.”

'Ignorance and optimism'
Gil Waters wasn't too keen on running any kind of insurance company in the 1950s, much less building an industry heavyweight. Back then, Waters was instead running his own public relations firm. He decided there wasn't enough money working for a newspaper after all. But a friendly visit from some of the area's top contractors one day in 1957 changed everything.

The contractors, part of the 27-member Sarasota General Contractor's Association, had a proposition for Waters: They had $2,800 in the coffers. They would pay him $400 a month to be the associations' executive secretary even though neither the contractors nor Waters had any idea what an executive secretary was supposed to do. If Waters hadn't made any money by the time the treasury funds ran out, there would be no more job.

Then, in 1958, Waters began speaking with some insurance folks around town about forming a workers' compensation self-insurance plan. He was told about some obscure Florida laws that allowed a nonprofit, such as the SGCA, to form such a fund.

By April 1, 1959, FCCI — Florida Contractors and Construction Industries Self-Insurance Fund — was official. The first seven clients were board members of the contractors association, basically local builders and developers who knew they needed workers' compensation plans for their employees. Together they brought in a total of $26,702 in premiums.

Still, the beginnings of the fund were anything but auspicious and even a perfect fit for April Fools' Day, says Waters.

“So, it was out of sheer ignorance and optimism that we started with premiums from seven guys on the board,” Waters said in the book, “A Legacy of Trust: The Story of FCCI,” published in 2007. The first seven insured signed the documents in Tallahassee and went through all of the preparatory work and became the trustees of this fund.”

That list of seven included some Sarasota business community titans of the day, such as Ted “T.T.” Watson, John Padgett, Russell Currin Sr. and Charles E. Stottlemyer.

Currin and his son, Russell Currin Jr., would top any list of people crucial to FCCI's success, from those early years to today. The elder Currin, via his Logan & Currin Contractors, helped guide the company in the early years through the intricacies of workers' compensation insurance.

And when the senior Currin died in 1964, his son took the vision further. Indeed, the junior Currin is widely credited with being the visionary voice leading FCCI's transformation from a worker's compensation operation to a mutual insurance company. Currin Jr., a onetime F-100 U.S. Air Force fighter pilot, served on FCCI's board for 22 years, including a lengthy turn as chairman.

Lessons learned
There would be turbulent times, too, in FCCI's first 50 years.

Waters, for instance, left the company in the fall of 1985. Some local newspapers reported that he had retired, but in reality a rift had grown between Waters and several board members that was too wide to repair.

The gist of the battles came down to control: Waters wanted to continue growing and expanding at the pace they were keeping, but some board members wanted to slow down. H. Ronald Foxworthy, a longtime FCCI board member, categorized the situation like a train ride, with Waters as the conductor and the board as the passengers.

“I'd say it was sort of like he was running the train and (the trustees) were trying to put the brakes on sometimes,” Foxworthy said in “A Legacy of Trust.”

While the brakes were eventually applied, even those who battled with Waters admitted he was instrumental to the company's success. Said Stottlemyer, in “A Legacy of Trust”: “I think there was a sigh of relief when Gil was finally removed, even though I don't think anybody questioned the contribution that he'd made and brought us to that point.”

Waters and the trustees have since talked out any differences and the company's original executive secretary has attended community events with many FCCI principals.

More recently, FCCI experienced some growing pains as it moved into the property and casualty insurance marketplace. A seminal moment in that movement occurred in 2000, when Jacobs — who became CEO in 1998 — set forth on the company's strategy to diversify and become more than a workers' compensation firm.

Jacobs and the company's board set a five-year goal to lower its workers' compensation premiums from 100% to something in the 45% range of company revenues. The board also wanted to branch into more traditional commercial property and casualty insurance and in the process, spread its risk outside Florida.

The board, realizing the quickest way to reach that goal would be through an acquisition, set a purchase limit of $250 million. When two consultants — independent of each other — recommended that FCCI buy Carmel, Ind.-based Monroe
Guaranty Insurance Co., Jacobs thought the company would be on its way.

It was. Only it was on its way to distress before diversification. To be sure, Jacobs and the board knew Monroe was a troubled company, one that was losing market share and had assorted financial issues related to reserves and reinsurance.

But the opportunity seemed to outweigh the risks, so on Dec. 1, 2000, the company bought Monroe for $58 million. At the time, Jacobs said the acquisition price covered $44 million of Monroe's equity and $14 million for its intangible goodwill.

The purchase, however, ended up costing the company $90 million over three years. Monroe turned out to be in worse shape than even FCCI's research revealed. For instance, FCCI had no idea that the company was embroiled in a lawsuit with some of its Ohio policyholders. Monroe lost that case, costing FCCI $18 million.

“It turns out we didn't get $44 million in equity,” Jacobs said about the Monroe purchase in a 2006 Review story. “We got a $14 million asset and a $44 million intangible asset.”

But the Monroe purchase also became a learning lesson for the company. In “Legacy of Trust,” Jacobs highlighted three of those lessons: First, he learned never buy at the end of a soft market, which happened with Monroe and cost FCCI 14 years of under-pricing with no opportunities to rebuild the balance sheet, Jacobs said.
Next, Jacobs said he would never again buy a company at the end of a year, which shortens the accounting and financial checks and balances process. And finally, Jacobs said he would be hesitant to buy another employee stock ownership plan, like FCCI did with Monroe.

Hurts so bad
Through the company's early lean years and its growth periods, through its friction with Waters and its acquisition challenges, one constant has remained: The corporate culture that reiterates that it will do what it says it's going to do.

Any company, obviously, can preach that or put it as a tagline in a corporate handbook. But at FCCI, many employees, even former ones, say it's a key to daily business.

Bill Ginn, a senior claims adjuster with FCCI, says his supervisors have given him clearance to do what he thinks is right on the scene of a catastrophe or crisis. “If you have a claim with us,” says Ginn, “the actual dollar amount isn't as big as the decision to pay it.”

Like the time Ginn responded to a fire at a client's moving and storage company near Miami. He got there so fast, coming from Sarasota, that the midnight blaze was still burning when he arrived. And within a week, Ginn had hand-delivered a $500,000 check to the client.

“It puts him back in business,” says Ginn, “and it saves the company a client.”

Jacobs and FCCI's board of directors are optimistic that employees such as Ginn will be the backbone of the company's next 50 years. That future, according to an FCCI vision and growth statement, calls for the company to be in 21 states and surpass $850 million in premiums by 2015. Other 2015 goals include reaching a surplus of $650 million, working with a total of 600 agents and growing to 800 employees.


The Sarasota General Contractors Association forms a new self-insurer's fund to save money on the cost of workers' compensation insurance for its members. The nonprofit Florida Contractors and Construction Industries (FCCI) Self Insurance Fund begins operation in Sarasota on April 1, 1959. The original FCCI Fund board of trustees includes T.T. Watson and John D. Kicklighter. The first administrator of the FCCI Fund, Gilbert Waters, serves until his retirement in 1985.

The Sarasota Builders Exchange, the sponsoring organization of the FCCI Fund, opens membership to builders outside of Sarasota who seek to be insured by FCCI. FCCI issues its first refund in the amount of $1,501.

T.T. Watson is named chairman of the board. Premiums exceed $90,000; cash and reserves are built up to $40,000 during the fifth year in business. A $7,000 refund is distributed to fund members at a dinner meeting held April 21. Local businessman Charles Stottlemyer is asked to join the board of trustees the following year.

In September, Russell Currin Jr. and H. Ron Foxworthy are elected to the board of trustees. Russell Currin Jr. is asked to fill the seat held by his father, the late Russell Currin, Sr. — one of the charter members of the FCCI Fund.

After nine years in business, FCCI writes $120,000 in premiums, with 46 businesses as members. During the next decade, FCCI will grow 100 times its size.

The FCCI Fund logo is designed, with the state of Florida in a circle, emphasizing that membership in the FCCI Fund is available statewide.

Independent insurance agents statewide are chosen to represent the FCCI Fund on the basis of quality and their ability to produce business.

While insurance companies are increasingly withdrawing from providing workers' compensation coverage in Florida due to skyrocketing medical care costs, the FCCI Fund surpasses $2 million in premium.

Florida Contractors and Construction Industries Self Insurance Fund changes its name to Florida Construction, Commerce and Industry Self Insurers Fund, reflecting the expansion of membership to include safety-minded commercial and industrial businesses. Albert Conyers joins the board of trustees.

The FCCI Fund worked closely with the drafters of workers' compensation legislative reform that took effect on Aug. 1. The new state law requires filing and obtaining state approval of ongoing loss control programs by the insurers. The first program to meet the state's guidelines was submitted by the FCCI Fund.

For the first time in history, a Florida nonprofit self-insurers fund makes it into thebig 10” among insurers of Florida workers' compensation insurance. FCCI Fund ranks ninth among more than 240 workers' compensation carriers.

Russell Currin Jr. is elected chairman of the board of trustees. Annual premiums reach $124 million, with more than 1,500 member companies.

The FCCI Fund, which has been Florida's largest group self insurer for several years, becomes Florida's number one overall writer of workers' compensation insurance, surpassing even the large national insurance companies. The FCCI Fund celebrates 25 years in business with losses equal to one-half of the industry rate: 54 cents versus $1.08 on each premium dollar.

The FCCI Fund moves into its new 20,000-square-foot, three-story office building on 13 acres at 2601 Cattleman Road in Sarasota. Marvin Haber joins the FCCI board of trustees. Gil Waters retires.

After 32 years, the FCCI Fund holds 14% of the workers' compensation insurance market nationwide. That translates to $233 million in premiums, serving more than 6,000 employers.

The 1993 refund tops $30 million for the 1991 plan year. The Legislature also passes sweeping changes in workers' compensation laws. As a response, FCCI files to become a mutual insurance company, changing the name to FCCI Mutual Insurance Co. William E. Getzen joins the board of directors. Robert Flanders is elected to the board the following year.

The FCCI Insurance Group is formed to link all the companies: FCCI Mutual Insurance Co., National Trust Insurance Co., Florida Employers Life Insurance Corporations and FEISCO Risk Management Services. In December, one year after becoming a mutual insurance company, FCCI earns an A- (Excellent) rating from A.M. Best. John Stafford joins the board of directors the following year.

FCCI becomes the nation's 15th largest workers' compensation insurance carrier, with nearly $300 million in premiums. The dividend return to policyholders is $39 million. FCCI reorganizes into a mutual insurance holding company, which provides access to additional capital resources for future growth. The move also allows the company to maintain the benefits of mutuality.

FCCI turns 40. To support expansion efforts in the Southeast, FCCI opens its Southeast regional office in Atlanta. FCCI also launches Brierfield Insurance Co. to serve businesses in Mississippi.

FCCI acquires Carmel, Ind.-based Monroe Guaranty Insurance Co. This acquisition increases FCCI's written premium base to more than $400 million, accelerating the company's expansion into the Midwest and helping to diversify the company's product line. FCCI also rolls out online workers' coverage through ExpressWrite. Agents and policyholders can access helpful account information online through ExpressServe.

FCCI unveils its new corporate logo and advertising campaign to better reflect the company's new image — the result of growth in its product line and geographic territory. FCCI also moves into its new 260,000-square-foot corporate headquarters at 6300 University Parkway in Lakewood Ranch, where it remains today.

John Stafford is elected chairman of the board. FCCI announces the formation of the Chairman's Club, an exclusive agency program for their top producing performers. ExpressClaim, an online claim service, is launched for agents and policyholders. Charles Baumann joins the board of directors.

FCCI introduces a new corporate seal,First Choice in Commercial Insurance.” It also begins writing all lines of business in North Carolina, South Carolina and Tennessee. Tim Clarke joins the board of directors.

FCCI eclipses $1 billion in cash and cash equivalents. FCCI's Southeast regional office celebrates $100 million in premiums after only six years in operation.

Robert Benjamin and Roy A. Yahraus join the board of directors.

FCCI begins writing all lines of business in Missouri.


Largest Private Employers based in Sarasota County
Company Fulltime employees Product/Industry
1. PGT Industries 1,171 Window and door manufacturer
2. Sun Hydraulics Corp. 650 Hydraulic cartridge valve manufacturer
3. Sunset Automotive Group 580 (30 part-time) Auto dealer
4. Longboat Key Club & Resort 512 Hotel and resort
5. FCCI Insurance Group 393 Insurance
6. Protocol Communications 372 Marketing
7. Pines of Sarasota 360 (50 part-time) Nursing home (nonprofit)
8. Ringling College of Art and Design 334 (80 part-time) College
9. Sarasota Bay Club 323 (120 part-time) Retirement community
10. The Colony Beach & Tennis Resort 300 Hotel and resort
(List excludes large employers that don't have a corporate headquarters in Sarasota County. Employee figures are for Sarasota County payrolls.) Source: Economic Development Corp. of Sarasota County



Summarized Balance Sheet Information (in thousands)
Assets 2007 2008 % growth
Bonds and other investments $1,150,119 $1,135,297 -1.3%
Short-term investments $2,000 $- -100.0%
Cash and cash equivalents $2,117 $25,367 1098.2%
Amounts due from policyholders $209,982 $193,815 -7.7%
Amounts recoverable from reinsurers $274,634 $216,485 -21.2%
Amounts due from Florida Special Disability Trust Fund $20,128 $16,765 -16.7%
Land, building, and equipment, net of depreciation $54,713 $51,991 -5.0%
Other assets $110,345 $130,558 18.3%
Total assets $1,824,038 $1,770,278 -2.9%
Liabilities and Members' Equity
Loss and loss adjustment expenses $971,287 $931,737 -4.1%
Unearned and advance premiums $225,689 $222,627 -1.4%
Debt $32,000 $44,000 37.5%
Other liabilities $132,365 $120,012 -9.3%
Total liabilities $1,361,341 $1,318,376 -3.2%
Members' equity $462,697 $451,902 -2.3%
Total liabilities and members' equity $1,824,038 $1,770,278 -2.9%

Summarized Statements of Earnings Information (in thousands)
Revenues: 2007 2008
Net premiums earned $504,706 $476,166 -5.7%
Net investment income $48,685 $48,212 -1.0%
Net realized investment (loss) gain $127 ($15,488) N/A
Service fees and other income $5,636 $3,022 -46.4%
Total revenues $559,154 $511,912 -8.4%
Costs and expenses:
Loss and loss adjustment expenses incurred $337,268 $330,959 -1.9%
Policy acquisition expenses $102,754 $89,602 -12.8%
Underwriting, general and administrative expenses $66,905 $71,424 6.8%
Policyholders dividends $6,854 $7,504 9.5%
Other $2,254 $3,176 40.9%
Total costs and expenses $516,035 $502,665 -2.6%
Income before income taxes $43,119 $9,247 -78.6%
Income tax (benefit) expense $10,888 ($44) N/A
Net income $32,231 $9,291 -71.2%
Source: FCCI Insurance Group

To view more of this Special Report on FCCI, please go to the Companies section of

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