The Elephant in the Room (PDF download)

							 




                                The Elephant in the Room
                                When Admiral Group launched a U.S.-based motor
                                insurance enterprise, it picked Richmond, Virginia -- a
                                regional insurance center with a competitive cost of
                                doing business.

                                Admiral Group plc, of Cardiff, Wales, had built a billion-dollar
                                enterprise (£910 million in 2009) selling motor insurance in the
                                United Kingdom and Europe and decided it was time have a go in
                                the world's largest auto insurance market, the United States. The
                                company hired Andrew Rose, a young executive on the fast track
                                who had recently led the roll-out of Countrywide Insurance's new
                                auto insurance line. Rather than acquiring an existing company,
                                Admiral wanted to start the business from scratch under the name
                                of Elephant Insurance.

                                Admiral gave Rose wide latitude to pick the best location in the
                                U.S. A West Virginia native and Darden School of Business
                                graduate, he ruled out certain locations where the temperatures
                                were too cold for his liking. But otherwise, he could pick anywhere
                                in the U.S. Rose narrowed down the prospects to ten locations in
                                major metro areas across the country then began evaluating them
                                according to key criteria such as the availability of blue-collar and
                                white-collar talent, transportation infrastructure, cost of living, cost
                                of office space and general business climate.

                                After a thorough search, Rose ended up where he started: in
                                Richmond, Virginia. He and his wife had come to the metropolitan
                                region of roughly one million people several years previously to
                                work for Capital One, the credit card giant. After a few years, he
    “Everything's working out   had changed jobs, first joining the Mid-Atlantic office of Progressive
    swimmingly so far. We're    Casualty Insurance, and then jumping to Countrywide. As it turned
                                out, Richmond was home to a large number of insurance
    having record days one      companies, including such well known names as Genworth
                                Financial and Markel Corporation, and it had proximity to major
    after another.”             back-office operations such as GEICO in Fredericksburg and USAA
                                in Virginia Beach.

                                When Rose analyzed the workforce attributes of the 10 candidate
                                cities, he discovered that his home town had a great mix of
                                insurance industry experience. "There's a pool of talent here that
                                we quickly tapped into," he told Global Location Link. Looking out
                                his office window during the interview, he said, "I can see four
                                people who came from four different insurance companies."

                                Richmond also had a reasonable cost of living, office space was
 


relatively inexpensive, and the general business
climate in the state of Virginia was excellent.
While other regions matched up well in individual
categories -- Dallas, Texas had very
competitively priced office space, too -- only
Richmond had the whole package, says Rose.

Such talk is music to the ears of Gene Winter,
senior vice president of the Greater Richmond
Partnership, the regional economic development                                                                 
organization. But he was confident that Richmond
would fare well. Although not widely renowned as      In just the past week, Elephant Insurance received a
a major insurance center like Hartford, Conn.,        big vote of confidence from two German re-insurance
the region is very well suited to the business, he    companies. Munich Re and Hannover Re agreed to
says. Indeed, the finance and insurance sector is     take one-third each of Admiral Group's U.S. risks,
one of the leading business clusters in the           while Admiral retained one third for its own account.
Richmond region, counting nearly 2,300                The Hannover Re contract is good for 10 years, while
enterprises and roughly 34,700 employees.             the Munich Re will last for 15.

Genworth Financial, a Fortune 500 company and         "We see a great future for the business," says Rose.
a market leader in retirement and home-               "We're here in Richmond for the long haul."
mortgage insurance, has more than $11 billion in       
assets. Markel Corp., an underwriter of specialty     ‐‐ January 25, 2010 
insurance products, is almost as large, with
nearly $10.5 billion. Health insurer Wellpoint also
maintains a major operational presence, Anthem,
in the region. The ranks of insurance companies
include entrepreneurial starts-ups like James
River Insurance, a provider of excess and surplus
lines, and U.S. subsidiaries of foreign companies
like Max Specialty, a unit of Bermuda-based Max
Capital Group.

With so many corporate headquarters here, notes
Winter, Richmond can claim a roster of high-level
executive talent. "We have the pink-collar clerical
workers and middle managers than an insurer
would need for a back-office operation, but we
also have senior executives with a depth of
expertise and breadth of experience in their
fields."

Indeed, Rose had no trouble recruiting a strong
team to introduce Elephant Insurance to the U.S.
market. The company conducted a soft launch in
the final quarter of 2009 to work out the kinks in
its operations, then in January rolled out a full-
fledged advertising campaign across Virginia, the
only state the company is currently doing
business in. "We do TV, radio, internet,
billboard," says Rose. "Everything's working out
swimmingly so far. We're having record days,
one after the other."