Interview conducted by:
Lynn Fosse, Senior Editor,
Published – November 11, 2011
Mr. Becker, what was the vision when Alterra was created?
The combination that created Alterra was really an additional stepping-stone
along the path that we started with the old Max Capital Group in 2006. At
that time, we were purely a Bermuda and Dublin, Ireland based
insurer/reinsurer with about $800 million in annual premiums, less than 100
employees and capital of a little over $1 billion. We knew that to capture
the upside opportunities in our business effectively we needed to do a few
things. Firstly, we needed to have a U.S. underwriting platform, secondly we
needed to enter the London marketplace through Lloyd's, and thirdly we needed
greater scale. So, in 2007, we started Alterra Specialty, a
wholesale-focused underwriting company and the original core of our U.S.
insurance platform. Alterra Specialty today writes over $300 million of
business per annum. We have since added a retail-focused platform that we
expect will take our U.S. insurance writings on a domestic basis up to a
total of over $400 million in 2012. In 2008, we bought a very attractive
Lloyd’s syndicate that was writing approximately $110 million of annual
gross premiums and that is now writing close to $300 million. Then, in 2010,
we combined with Harbor Point to create Alterra; so today we have a company
that has 22 offices in ten countries, writing a little under $2 billion in
annual gross premiums, with approximately 500 employees and almost $3
billion of capital. Therefore, we have had quite a transformation in a short
CEOCFO: What is special about Alterra?
Alterra knows what it is, and it knows what it is not. We are specialty
underwriters of both insurance and reinsurance; we are not everything to
everybody and we do not try to play in every market. We pick markets and
product lines where expert underwriting really makes a difference, as
opposed to the many areas of our industry that are more like manufacturing
operations with thousands of small policies with small underwriting
differentials. Our products are typically quite customized for commercial
clients and result in large per policy premiums. Intellectual capital is
paramount, as this type of underwriting can be quite complex.
CEOCFO: What is an example of the kinds of things Alterra is
insuring, and what is the process that makes it difficult and special to
We insure some portion of many of the companies in the Fortune 500. These
are big complex organizations. Whether we are taking part of their property
risk or part of their excess casualty risk, or even whether we are on their
employment practices liability program or their errors and omissions
program, these are largely customized writings with very distinctive needs.
Therefore, we are working closely with the risk managers of those
CEOCFO: Do you see additional acquisitions for Alterra?
We have proven that not only are we builders, we are very successful at
managing what we have built. During the period of time when we more than
tripled our business, we maintained a very attractive combined operating
ratio, which is the key metric of quality in our business. Therefore, I do
not think that there is any reason why we should stop now, because we have
the organizational expertise and the organizational discipline to grow
properly and effectively, whether organically or by acquisition.
CEOCFO: What has changed about the market that makes the skills at
Alterra so important?
Our industry is one with cyclical pricing. When the market is going up,
virtually anybody can look like a great underwriter. The real difference is
when pricing is going down. It is how well you perform during that down
cycle, and we have been in a down cycle since 2006. However, we have
continued to look quite attractive. It is a little bit like that old Warren
Buffet saying, “You know who is swimming naked when the tide goes out,” and
there is a little bit of that in our business.
CEOCFO: Are there areas you would like Alterra to be more involved in
We are still a relatively small player in terms of market penetration in
many of our locations, and would like to grow our operations in some of
those areas over time. For example, we would like to have a larger presence
in the London market. London is the world’s best specialty insurance
marketplace, and specialty is our business. We are still a very small player
in the domestic U.S. marketplace. In 2009, we were able to bring on board an
extremely competent and experienced reinsurance team in Latin America, and
now we have offices in Rio, Bogotá, and Buenos Aires -- this is a very
attractive opportunity for us in economies that have natural growth
CEOCFO: How does Alterra reach potential customers?
We work 100% through brokers and agents. We do not write any business
direct. We use the existing nucleus of the broker and agency system to
access our client base.
CEOCFO: What do you look for in the people that represent Alterra?
The practical reality in the reinsurance business and in the Fortune 500
or even Fortune 1000 insurance business is that a very large proportion of
the business is written through the big three global brokers: AON, Marsh,
and Willis. So we clearly work hard to partner with those organizations,
essentially discipline by discipline, and know what they are looking for to
serve their client base, and we orient ourselves to be able to respond
CEOCFO: Alterra has “multiple tools to optimize performance”; what
are the differentiators?
We are more diverse than many of our peers. We have assembled a platform of
specialists in a variety of coverage areas. Each one of our specialist teams
is almost like a business unto itself. Therefore, when we bring on a new
team we are looking for people that have a proven track record in their
space and a client following that is likely going to credential their
ability to perform for Alterra. Much of our strength lies in the breadth
of diversification and the superior level of skilled resources that our
CEOCFO: What is the financial picture like for Alterra Capital today?
Alterra actually continues to perform quite well in what is a very tough
pricing environment in our sector of the market. The one thing you know is
that pricing will improve; the question is when. Most signs would indicate
we are getting very close to the bottom and that the pricing cycle is going
to invert the other way. When the tide turns, the growth and expansion
strategy that Alterra has successfully implemented should cause our boat to
rise much higher and much faster than it would have in our prior formation.
Therefore, we are quite optimistic about the future. In 2011, many of our
peers will make no money due to the magnitude of property catastrophe events
around the world. Alterra, however, expects to still have a respectable
return on equity, and I think that will underscore the benefits of our
CEOCFO: Has the investment community paid attention to Alterra?
The investment community in general is waiting for a cycle turn before
participating in any meaningful way in the property and casualty insurance
space. There is nothing new about this. The investment group will come in
and push multiples up at the beginning stages of a pricing cycle and they
will divert their money elsewhere at the end stages of a pricing cycle.
CEOCFO: What might surprise people about running such a large
insurance operation, and what do people not know about your business?
I am not sure people appreciate how important human or intellectual capital
is to our industry, and the fact that companies are very different. Most
people look at the insurance industry and they refer to it in the singular
as though we are all the same. Once you get inside the industry you realize
that really is not true -- not only are the performance characteristics of
the companies different, the cultural aspects of the companies are also very
diverse. If you want to be a successful investor in this space, you really
have to spend the time to get to know the individual management teams and
how they approach the business, verses their peer group.
CEOCFO: In closing, why should potential investors pay attention to
Alterra Capital today?
I do not think you will have a better opportunity in the foreseeable future
to invest in this space at really attractive valuations when the market is
on the cusp of what is likely to be an improved pricing environment. If you
decide to invest, you should go with the firms that have proven their
quality and consistency in underwriting performance -- I would rank Alterra
very near the top of that list. Alterra is a great company that has built a
superior global platform. We have everything in place to capitalize when the
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