As National Guardian Life Insurance Co. celebrates its 100th anniversary this year, the Madison-based mutual insurer is a lot different than it was for most of its history.

In the mid-1990s, NGL looked like many other insurance companies, offering traditional product lines such as whole life, universal life, term insurance, annuities and disability insurance through a system of captive agencies and brokers, according to Mark L. Solverud, NGL’s executive vice president and chief operating officer.

It wasn’t working.

“We were trying to be all things to all people,” says John D. Larson, chairman, president and CEO. The company faced excessive costs and product lines that were not competitive with larger firms.

NGL’s reinvention beginning in 1997 involved:

• Withdrawing from sales of all of its traditional product lines by 2005;

• Entering niche markets in which it could obtain a name and reputation;

• Developing an active merger and acquisitions initiative;

• Disbanding its agency force in 2001, and moving to a wholesale marketing strategy to sell its specialized products;

• Eliminating a significant amount of corporate expense;

• Making a big shift in the corporate culture to one of welcoming change and recognizing the challenges of an increasingly competitive life insurance industry.

Larson; Solverud; Robert A. Mucci, senior vice president and treasurer; Brian J. Hogan, senior vice president and chief financial officer; and Sherri A. Kliczak, assistant vice president and corporate secretary; took time off from busy schedules recently to discuss their company and the new direction it is taking. They talked in the third-floor board room of NGL’s headquarters on a bluff overlooking Lake Mendota. The stately building has provided a panoramic view of the Madison lake since the company moved there from another site in the next block in 1965.

Specializing in a specific niche

“NGL is now the fourth largest company nationwide for sales of pre-need insurance,” Solverud says. This specialized form of life insurance is used to pay for predetermined expenses of a funeral, cremation or burial. Since a traditional funeral with casket and vault costs $6,000 and flowers, limousine service, obituary placement and other services can boost the price to more than $10,000, a pre-planned funeral covered by a pre-need life insurance policy can be an important part of a policy holder’s planning. The policies are sold by funeral directors, who often guarantee prices for pre-arranged funerals. NGL, which is licensed in 49 states and the District of Columbia, sold almost $215 million of premium in pre-need policies in 2009. “We will sell $250 million in pre-need premium this year,” Solverud adds. “That’s huge.”

Through its affiliate, Settlers Life Insurance of Bristol, Va., the NGL Group also has entered the final expense insurance niche. These are small policies often purchased by middle-income Americans often overlooked by larger insurers. These policies name a beneficiary who may use the money to pay for funeral expenses, the payoff of debts and other “final expenses.”

Settlers Life, which NGL acquired in 1999, has a significant market share in final expense life insurance, Solverud says.
A final niche into which NGL Group has moved is what it calls “voluntary benefits” coverage—specifically group dental and vision policies. “This is a much smaller part of our business that we’re trying to expand,” Solverud says.

Under its active merger and acquisitions initiative, NGL since 1997 has acquired 658,000 policies of 13 companies with $713 million in reserves, and now has some 850,000 policies in effect, including the ones it used to sell and continues to administer.

Its acquisitions have focused on buying large blocks of in-force insurance, rather than pursuing new sales. “This has been a major part of the company’s tripling of its assets from $800 million in 1997 to $2.3 billion in 2009,” Larson says. By buying in-force blocks of insurance, NGL cut the costs of developing new product lines and created efficiencies through economies of scale, through consolidation of administrative and other systems and by establishing uniform and integrated procedures.

NGL’s wholesale marketing strategy eliminated costs of administering an agency sales force as well as costs of developing and adapting traditional insurance lines.

Technological advances also have played a big part in reducing costs. The niche products such as pre-need insurance and many of the existing blocks of policies the company has acquired involve processing thousands of small-sized policies.

“A lot of our processes are automated,” Solverud says. “We don’t handle a lot of paper.” Over the past several years, the company has converted paper policy files to electronic imaging for all of the NGL Insurance Group’s in force policies, including the acquired blocks. A Web-based automated data system speeds the application process for new business by checking that the proper forms are used, that the agent is authorized to submit business and that all the required information was collected on the application.

Conservative consistency

Though there’s a lot new at NGL, it’s retained a traditional reliance on a conservative, lower-risk investment strategy that has allowed it to be profitable in the in the past two years, at a time when some insurers were being hammered by the economic recession. Hogan says the company’s operating return on equity was a healthy 8.8 percent last year.

“Some of the innovative products Wall Street developed had risks we weren’t willing to accept,” Mucci says. “The returns made no sense compared to the risks. You can’t get junk bond returns from a double-A-rated bond.”
Adds Larson, “We had to look beyond the ratings.”

In its 100 years, NGL has had only five presidents, including two pairs of fathers and sons. George A. Boissard, known as “the general” because he had been the company’s general manager, was named its first president in 1913. His son, Richard S. Boissard succeeded him in 1944. John D. Larson’s father, Lawrence J. Larson, joined the firm right out of college in 1933, worked his way up through the ranks to become president in 1957, and served in that capacity until 1969. J. Clayton Howdle succeeded him. John Larson was promoted to president in 1974.

The company started as a stock company, but converted to a mutual insurance firm owned by its policyholders in 1936.

John Larson joined the firm in 1969 after completing a bachelor’s degree in accounting, a law degree and an MBA in business administration in six-and-a-half years at the University of Wisconsin in the 1960s.

He was a real military general, retiring as a brigadier general of the Wisconsin Army National Guard in 1998 after serving 34 years, three of them in active duty.

Giving back to the community

National Guardian Life has long been known not only for service to its life insurance policy holders, but also for the service its employees provide for its communities. For its efforts, NGL recently received the 2009 Outstanding Business Award of the Greater Madison Chapter of the Association of Fundraising Professionals.

Kliczak says, “There are financial, social and health needs in the communities we serve. Building upon our company’s generous financial support, our employees contribute their time and talents, in addition to fund-raising, to nonprofit organizations.”

The company over the years has been one of the top 25 contributors to Dane County’s United Way with 2009 contributions totaling $134,000, an 11 percent increase over the previous year. Larson is a past United Way campaign chairman and chairman of the board of directors. The company holds special events such as auctions, chili cook-offs, car washes, tailgate lunches and even pie-in-the-face contests over several months to bolster its contributions. More than 90 percent of its Madison work force takes part in the campaign.

In addition, NGL supports 36 other charitable organizations. All employees are allowed off from work for eight “giving” hours to charities each year. A matching gifts program started this year involves the company matching donations from employees up to $2,000. Many employees also take part in days of caring to help organizations.

At blood drives for the American Red Cross held at NGL twice a year, employees have donated 920 pints of blood over the years, which had the potential to save more than 2,700 lives.

The company also has contributed to scholarships for the University of Wisconsin for more than 45 years and to Madison Area Technical College for almost 20 years.

Larson says that one of the ways NGL will celebrate its centennial is by a major donation to an area charitable organization.
Asked the key to a business reaching age 100, Larson had a simple answer: “Our reason for success is we’ve got a strong team of employees who are very conscientious and very good. The smartest thing I ever did was hire a good staff.”

NGL is relying on that staff and a reinvented business plan to power it in a new century for the insurer.

By John Hill

You can contact John Hill by e-mail at jhoythill@sbcglobal.net.