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Over his career, Richard Pitbladdo has saved insurance companies billions of dollars.
Armed with a Ph.D. from Stanford University, where he was a student of former Federal Reserve Chairman Ben Bernanke, Pitbladdo is an expert in the field of long-term care insurance.
Older people buy long-term care insurance to pay for expensive services if they become unable to care for themselves because of disability or chronic illness. Such insurance usually pays for help when someone can't perform basic tasks such as getting out of bed or getting dressed.
Between 1997 and 2002, Pitbladdo managed capital and investment strategy for the long-term care business of insurance giants such as John Hancock and GE Capital. “My main contribution to the industry was risk management,” he says, saving companies from the sting of declining interest rates.
Now, Pitbladdo is managing his own company's risks. Fort Myers-based LTC Global uses capital it has raised to buy insurance agencies that specialize in long-term care insurance, and it also buys the renewal commissions for cash from individual agents. “We are the exit for long-term care insurance agencies,” Pitbladdo says.
Pitbladdo says the industry is changing because many owners of independent agencies that sell long-term care insurance are contemplating retirement. “There's a lot of agency owners who are in their 70s and 80s,” he says, estimating there are “hundreds” of such agencies around the country. “It calls for consolidation, and we have a head start.”
Originally, LTC Global started as a consulting firm to the long-term care industry, but Pitbladdo says clients sometimes didn't adopt his recommendations. “It's very frustrating not being the decision maker,” he says.
So starting in 2007, backed by German bank DZ Bank, LTC Global acquired more than a dozen insurance agencies across the country. The company has $150 million of debt on its balance sheet it has used to make buyouts. “We're about to break through and get more credit,” Pitbladdo says. “I'm expecting we'll raise $500 million.”
In fact, Pitbladdo's company is an industry pioneer because it was the first to issue short-term commercial paper backed by commissions from long-term care insurance policies. Now, Pitbladdo plans to issue longer-term notes to raise capital, which are categorized as esoteric asset-backed securities. “We'll be the first commission-backed bond issuer,” he says.
Revenues have been stable in the last several years at about $50 million annually, Pitbladdo says, though he notes the company could hit $60 million this year and more next year if the capital is available. The agency side of the business has more than 400 agents, he says. “We're looking for another growth spurt next year,” he says.
LTC Global moved its corporate headquarters to Fort Myers in 2010 from Oregon in part because of that state's high income taxes. LTC already had an office in Fort Myers, the result of a prior acquisition.
“I moved when the tax rate was 9% in Oregon,” says Pitbladdo, who purchased a condo in Fort Myers in 2010.
Follow Jean Gruss on Twitter @JeanGruss
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