From philanthropy to profitability

From philanthropy to profitability | Insurance Business America

From philanthropy to profitability

Applied Underwriters head Steve Menzies takes a holistic approach to leadership, motivating his peers to engage cohesively in business, citizen diplomacy and philanthropy to achieve optimal success.

“I believe that any lines that try to set apart one’s professional, personal and philanthropic undertakings miss the point,” he says. “Life’s approach should be unified if one is to be consistent and successful.”

Amid the ongoing success of his professional career, Menzies actively works to build out his charitable footprint, setting an exemplary standard for his colleagues, partners and friends. This May, he met with Pope Francis and was appointed to create and spearhead the global St. Francis Day Foundation, focusing on ‘human ecology’ to develop an agenda that harmonizes the disparate interests of human activity in a meaningful way to benefit humankind.

“An example of the first activity underway is the construction of a supra national arrangement for the distribution of vaccine-related medical technology fairly among nations and stateless peoples,” he says.

Menzies also prioritizes philanthropic involvement to promote and facilitate meaningful growth within his organization. Applied’s new headquarters in Omaha, Nebraska’s Heartwood Preserve is in the process of being built; once complete, it will be part of one of the largest urban developments in the US. The 500-plus-acre Heartwood Preserve has surpassed expectations of most conventional land development projects. The environmentally conscious development includes a variety of retail, commercial, residential and recreational facilities.

“The results have been overwhelmingly favorable economically, environmentally and aesthetically,” Menzies says. “It’s Applied’s way of giving back to the local community and our dedicated employees.”

He adds that in business, philanthropy and in everything one does, having the same set of values is key. “The point is to apply an intellectual and emotionally courageous approach to every effort,” he says. “For me, there is no end to learning, to thinking and rethinking, to investing, and to retaining a deep, abiding optimism.”

The Berkshire buyback

Back in 2005, Menzies sold a percentage of Applied Underwriters to Berkshire Hathaway. However, as Applied’s footprint became more robust within the national marketplace, its growth began to create a problem for Berk-shire: Applied and Berkshire’s other insurance businesses were growing into competitors, creating unproductive channel conflict.

In 2019, Menzies reacquired the company in a deal valued at $920 million, including the buyout of 81% of stock that had been held by Berkshire since 2005.

“I recall when Warren Buffett expressed an interest in our company in 2005, purchasing a majority share – and equally defining, our unprecedented buyback from Berkshire in 2019, returning Applied Underwriters on its own course as a private company,” Menzies says. “As an entrepreneur, I have long felt a sense of inevitability about such a buyback and have looked toward the opportunities that independent ownership holds. Our acquisitions and market positioning over the past 24 months show the value of that transaction for Applied.”

Buffett typically makes investments in companies, then leaves their affairs in the hands of those who made the company attractive to him in the first place. This approach allowed Applied to develop its own corporate culture within the Berkshire Hathaway group.

“Warren set the governance standards with great but tempered ambition for all of the companies in Berkshire and showed strength through his native humility and modesty,” Menzies says. “He is a consummate capitalist and easily among the leading paradigms of entrepreneurship in business history. He operates with utmost integrity.

“On a personal note, my relationship with Warren meant a lot to me – it still does – and I found myself emulating his approach to business with objectivity, yet always with respect for the courage of entrepreneurs.”

Commitment to culture

Applied was born in the workers’ compensation realm – a difficult, dynamic and heavily regulated line of insurance.

“We learned its intricacies and the very real human risk it involves,” Menzies says. “We then used that insight to help our customers better manage their risk. Through a pattern of profound study, considering the human side of risk and seeing opportunities where others see obstacles, we have grown into new product lines, new challenges and built a global collective of loyal customers and partners.”

While Applied’s philosophy is rooted in care for injured workers, homeowners and business owners, the company continues extend its reach to countless other classes.

“With imagination, experience and integrity, we dig into new risks to create original solutions while factoring the human story into every pursuit,” Menzies says.

“Disciplined financial strength is a core value, since without it, you cannot earn a customer’s confidence,” he adds. “We are proud that Applied’s insurance companies became the first monoline workers’ compensation writer ever to receive an A+ (Superior) rating from A.M. Best 10 years ago.”

Menzies also notes that Applied’s staff reflects the company’s unique spirit through their dedicated and thoughtful responsiveness, as well as their forward-looking approach to clients’ needs well beyond the letter of the policy.

“All of our customer calls and needs are handled on our Omaha campus by company employees,” he says. “Our customers and producers never reach a TPA or someone halfway around the world. Unified operations present Applied’s customers with a consistent and responsive experience.

“We honor claims and go beyond the minimum in care, which we believe is simply the best option for real protection and responsible pricing. While our competitors adopt slogans and often do mean them, getting actions to suit the words is quite another matter. Applied’s leadership and top decision-makers have a dimension of care that runs deep in our corporate culture.”