For three romping years, now-seasoned insurance executive John R. Berger was a standout basketball player in European leagues. Better, actually--he was a player-coach, responsible for motivating the team, running practices and then directing execution of plays in games. These skills and enthusiasms have carried over to the present day in his duties as president and CEO of Bermuda-based Harbor Point Re Ltd., a fascinating Class of 2005 story.
Berger has long embraced the concept of teamwork as the key to success in virtually any endeavor. It is this philosophy that served him well in basketball as an all-state high-school basketball star in Basking Ridge, N.J., in college at Princeton University and beyond to the European professional teams.
And it is this philosophy that has followed him into the business world, where on notable occasions he has joined forces with other talented professionals in synergy-driven situations to establish and nurture several highly successful reinsurance companies.
Berger, who stands a comfortable 6 feet 6 inches tall, fondly recalls his days in Europe. "I met a lot of other players, learned how to speak French so I could communicate with my team members, and the travel opened up for me so many new perspectives on the world," he recalls. He also met wife Nathalie, a Swiss-born attorney, with whom he has been married for 29 years. The pair has three daughters: Julia, 19; Valerie, 17; and Camille, 14.
Each stage of John Berger's highly successful life, now in its 56th year, has been a clearly marked stepping stone--starting with falling under the sway of Jim Peterson, his "terrific" economics teacher in high school.
"I knew I was going into business," Berger says. "I didn't know which business, but I felt economics was a good background for a business career."
After three years in Europe, Berger wanted to come home to New Jersey--"where I was from," he says--and Prudential Insurance Co. in Newark was one of the biggest games in the state.
There was another draw at Prudential. "They had a management training program in which you could spend a period of time in various parts of the company, and then after about two years you'd sit down and decide what you liked and what the company needed," he says.
"I think I got lucky," he observes. "When I got into reinsurance, I found something that just clicked. I liked everything about it. I got excited about it--I liked the people and I liked the transactions."
The close-knit community feeling within the reinsurance field was attractive to Berger. Observing that the reinsurance segment is relatively small in numbers (referring to participants), he notes the appeal that smaller numbers represent, stressing, "I like the fact that I can get to know a lot of my clients personally."
MAKING IT TO THE PROS
But choosing the path and being ready to walk it were two different things, as Berger realized. Despite his superb undergraduate education and worldly experience, he now had to tackle the very practical challenge of gaining specific insurance expertise. Driven by that goal, Berger took courses offered by the Chartered Property Casualty Underwriters Society, earning his CPCU designation in 1981. He also attended Rutgers University at night, earning his master's in business administration in 1986. And even though he concedes that reading insurance policies with a fine-tooth comb was tedious at times, he pored over such documents from all insurance lines to build up the insurance background he felt was necessary to succeed. "A lot of education needed to be done, and I did lots of reading," says Berger, who methodically prepared himself for a career that quickly moved upward from his professional entry into the reinsurance arena as a direct treaty underwriter at Prudential Reinsurance.
Several years later, having also worked as a casualty underwriter at General Re, the fun picked up. Berger was contacted by a former colleague and recruited to join others who were assuming leadership roles in F&G Re Inc., a startup reinsurance company owned by USF&G. Teamwork and talent spelled success for the company and for Berger, who advanced to the position of president and CEO.
"At first I was in charge of the casualty area, and it just took off," Berger says. "I was working long hours, working weekends, and it was successful. I got a lot of responsibility, and it was fun."
But it was in 1998 when Berger took the first giant step of his career.
At the age of 48, he was called on by the Chubb Group of Insurance Companies to create a reinsurance business for the mighty insurer. From scratch.
"When Chubb started Chubb Re, I was the only employee," Berger recalls with obvious fondness. "It was hard, because you're new and you have to hire all the people and you had to do all the logistics."
Plus, when Chubb Re was launched, the market was, in a word, "terrible." And thus occurred what can be considered a historic footnote conversation in the contemporary American insurance market.
"I told Chubb, 'We're not going to do anything until something happens in this market,' and they said, 'Fine, we understand, and that's the way to be in this business,' " says Berger.
Not only was that a gutsy decision on Chubb's part, it was a profitable one. By 2005, Chubb had a portfolio that stood at $1.4 billion.
"It was a great partnership, and Chubb was a terrific company to be a part of," says Berger, who earned the titles of president and CEO of Chubb Re.
But when representatives from Stone Point Capital LLC, a global private equity firm backed by some major names in finance and investment, including Stephen Friedman, the former chairman of Goldman Sachs, approached Chubb about the possibility of "spinning out" Chubb Re into a new entity, Berger was ready for the next giant step in his career.
"I saw this as an opportunity to take the company to the next level, particularly in the property-catastrophe area," says Berger.
It was a win-win opportunity for all involved. At the time, Chubb said it expected the transaction to result in a pretax gain of approximately $200 million, and during a two-year transitional period, it would continue to receive cash payments on the amount of reinsurance business placed through Chubb by Harbor Point, as well as the amount of Chubb business renewed by Harbor Point.
John J. Degnan, vice chairman and chief administrative officer of Chubb, observes, "The deal was done when the property-CAT market was really going to take off after Katrina, and we weren't going to be able to liberate John and his group from the capital constraints that Chubb maintains because of our exposure on our primary P/C book. So it was the right time."
Berger notes that there is still an appreciable amount of Harbor Point business that flows through Chubb.
In addition, Chubb has a continuing 16 percent ownership stake in Harbor Point, and Harbor Point management has invested about $14 million in the company. Beyond Chubb, insurers Harbor Point does business with include AIG, Ace and Hiscox.
"Harbor Point is kind of like the same thing for the third time for me and some of my colleagues," Berger says. "OK, it's new, There's a lot to do. It's a chance for people to step up. The responsibility is there for the taking. And now it's time for younger people at Harbor Point to step up and see what they can do."
Back to that notion of teamwork and why it's so important to an organization led by Berger.
"We are a very horizontal organization. We're small," he says of his group, which has 57 employees split between headquarters near Hamilton, Bermuda, and another office in Bernardsville, N.J. "We don't have a lot of managers. So your success as an employee isn't measured by how many people you manage. Your success is measured by how well the company does as a whole."
Adds Berger, in what is the crux of his views on a team-oriented organizational structure: "I think the key to teamwork is that you have to have an incentive compensation plan that everybody benefits from if the company is successful. First, you look at how much the company made overall, and then, yes, you look at the particular contributors. But I think the incentive compensation plan will determine whether you work as a team or not."
Sums up Berger: "Any championship team works this way. From the receptionist to the CEO, we're all in it together."
With natural disasters seeming to have inundated the world in the recent past, the reinsurance market today, says Berger, "is not a business for the fainthearted." Following the devastation brought about by Hurricane Katrina last year, many thought the reinsurance marketplace would tighten up in all lines and in all parts of the world.
"This has not been the case," reports Berger, who sees "some improvements in underwriting in certain markets around the world," but decidedly softer conditions in many others with market opportunities not as robust as predicted.
Berger stresses the importance of underwriting discipline and adheres to a basic and proven roadmap with regard to his company's operating strategy, which is "to write the business commensurate with the market demand and risk."
The discipline that he applies to his business strategies, looking to the longer-term results rather than the short-term gain, was likewise cited by Thomas Wafer, managing director, non-U.S. property, at Harbor Point's Bermuda headquarters. "John is very consistent and very disciplined. He has a game plan and sticks to it as much as possible. He is very committed to keeping to the (underwriting) standards and objectives that have been set when putting our portfolio together."
Additionally, Wafer points to Berger's strong relationships with his colleagues, preferring to work with them as a team, rather than dictating their actions.
Adds Wafer: "He's very loyal to his colleagues and is always looking to take the time to make sure that his colleagues have a say in what's being presented. He likes to hear people's opinions . . . to get a dialogue going. He values the opportunity to sit down and talk with people."
A.M. Best Co. Inc. continues to stand behind the strong endorsement it gave Harbor Point when it was spun off from Chubb in late 2005.
Right out of the box last December, Best gave Harbor Point Re an "A" rating, where it stands today, says Best analyst Robert DeRose. This is the highest rating of any of the new companies and higher than some of the existing ones. Standard & Poor's rating is "A-."
Getting right to it, Best noted that Harbor Point is led by CEO John Berger, "who has 28 years of reinsurance industry experience, which includes serving as president and CEO of Chubb Re since 1988. Chubb Re has a track record of generating favorable operating results relative to its reinsurance peers."
Best also indicated, however, that "Harbor Point's strengths are partially offset by increased competition and new capacity brought to market from both established and newly created companies. This additional capacity could dampen expected returns if pricing of reinsurance coverage fails to meet anticipated levels"--both of which are concerns expressed by John Berger in assessing today's markets for reinsurance.
Nevertheless, in early fall of 2006, Best's DeRose said the outlook for Harbor Point remained "stable." He added: "The company is still very young, but it's an excellent management team."
The Harbor Point portfolio has dropped in size from about $1.4 billion at the time of the spin-off from Chubb to a current level of $1 billion--given that "market opportunities are less today than yesterday," Berger says.
Of the total portfolio, Berger says, "it's a fair amount U.S. casualty, but the big shortage in the world is U.S. wind-exposed property/casualty, so we have a fair amount of property-catastrophe on the book. But we also do aviation, marine, crop business and trade credit. It's a pretty diverse book of business."
Further, following the spin-off, the company has been "modestly active" in the property reinsurance realm, Berger says.
Looking ahead, Berger, who has a way of succinctly summing up matters, has one word for the reinsurance business he loves so much: "tough."
"It's getting tougher by the minute," he says with great intensity. "There's a lot of competition. There are many big, strong companies that seem to be intent on growing regardless of profitability levels.
"And then we're also seeing new sources of capital coming in, particularly in the catastrophe area," he adds. "We're seeing hedge funds, private equity funds come in and form special-purpose vehicles in order to assume reinsurance."
THE FUTURE OF REINSURANCE
Most immediately, rates have risen as much as expected in the peak-zone CAT business this year, Berger notes, but "everywhere else," no. "Peak-zone CAT rates continue to increase," he adds. "Everything else ranges from small increases to small decreases."
What about the reinsurance industry in the long run? "Reinsurance will always be there," Berger says. "By its very nature it's very volatile. It's going to come down to who can manage volatility. I see people making two big mistakes.
"The first is that they want to grow for the sake of growing, and the second is that they're not writing bad deals, but they're not getting the appropriate margin for the risk they're taking."
"Our business is not that precise," he concludes. "We get surprised a lot, so you have to be shooting for the appropriate return on your capital."
And the future for John Berger himself? "I exercise a lot," he says. "I play tennis and golf, and I run in marathons. Training is kind of excruciating--it's painful--but it's also fun. When you get done, you really feel like you've accomplished something. "
No, Berger says with a laugh, "Basketball is a young man's sport."
lives in New Jersey.
lives in Croton-on-Hudson, N.Y.
January 1, 2007
Copyright 2007© LRP Publications