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The Once and Future C&F - Building an Empire
C &F’s business model soon gained traction. Within a few years of C&F’s formation, they signed their first contract to manage the New York fire insurance business for Allemannia Fire Insurance Company of Pittsburgh. C&F placed risks on Allemannia that did not fit North River’s underwriting guidelines. The model definitely relied on a heavy element of trust — Allemannia had to trust that the business assigned to them was good, even though they knew that it fell out of North River’s appetite. Even so, other companies soon lined up for the same deal, including The Arhen & Munich Fire, The New York Fire, Peter Cooper Fire, Empire City Fire, Dutchess Fire, Nassau, Williamsburg City and United States Fire. In 1907, Crum & Forster transitioned from a partnership into a corporation, with paid-in capital of $100,000 ($3.3 million today). The authorized purpose of the company was to “represent insurance companies as agents” — which sounded straightforward, but the relationship between Crum & Forster and the companies that it managed was convoluted. That was especially true of the relationship between C&F and North River. Even now, it is not clear that C&F’s founding trio ever totally separated themselves from North River — which makes sense as they did launch the business during a depression, and conservative insurance types do tend to hedge their bets. William Hutchins, North River’s president, was the fourth partner in C&F, while Frederick Crum continued as secretary of North River, even after the formation of C&F. Years later, North River’s management team celebrated John Forster’s 25-year association with North River — which gives the impression he never left. Eventually, both Crum (in 1918) and Forster (in 1919) would hold the president’s title at North River. (Maybe seasoned insurance talent was in such short supply that holding multiple positions worked as a win-win back then?)
In the early days, C&F used some of their profit from the agency to buy shares in North River — but the profits were relatively modest. The C&F / North River relationship took on a new dimension in 1908 when a fire in Chelsea, Massachusetts, impaired North River’s surplus. In response, C&F sold its building at 95 William Street, leased it back, and used the proceeds to recapitalize North River. For a company whose stated objectives were “to produce, underwrite and process the insurance business of companies under its management in the most efficient and economical manner possible,” helping one of those companies recapitalize was really going above and beyond from a customer service perspective! Even so, that was the kind of creative, opportunistic approach you might expect from this C&F team — operating in a period before there was an established playbook. In fact, Forster’s idea of selling the building and leasing it back was one of the earliest instances of a sale-leaseback (maybe the first). Ultimately, C&F ended up owning 100% of North River. C&F’s close, clubby relationships extended to other partner companies as well. In 1906, two of the companies managed by C&F were struggling after the San Francisco earthquake. C&F voluntarily relinquished commissions due from the companies and continued to handle their business at a loss. C&F also helped replenish the capital of those companies by purchasing stock — an investment made possible by loans from the Hutchins family. When those companies were back up and running, the investments paid off — and C&F’s growing reputation as a supportive partner allowed the firm to attract many more partner companies. By 1910, C&F was managing 26 insurance companies — called their “mosquito fleet” because, while no single company was large, together they proved formidable. The structure required a large measure of mutual trust.
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