The St. Paul goes to New York for new CEO
Dee DePass
Star Tribune
Published Oct 12 2001
One month after terrorist attacks in New York City dealt the
St. Paul Companies a nasty hand, the company has hired a New
York native -- Jay Fishman, CEO of Travelers Insurance
Group -- to succeed retiring CEO and Chairman Doug
Leatherdale.
The appointment of Fishman, 48, is effective immediately.
Leatherdale, 64, will remain on the board but will move out of
his office next week.
The speed of Fishman's appointment was not related to the
Sept. 11 attacks. "It had nothing to do with that. We started this
process months ago," Leatherdale said Thursday. Still, concerns
about a successor at the St. Paul Companies, which have
lingered for about a year, took on new urgency in the wake of
the company's attack-related exposures.
Fishman joined Citigroup's predecessors in 1989 and helped to
tackle the acquisition of Travelers and, later, Aetna before
becoming the No. 2 man under Citigroup Inc. CEO Sandy Weil.
In addition to his duties with Travelers, Fishman was
Citigroup's chief operating officer in charge of finance and risk.
The St. Paul considered six candidates, but Fishman was the
front-runner, Leatherdale and search executives said.
Fishman began receiving calls from search executives in April
but made up his mind just three weeks ago. As a result, the
energetic printer's son from the Bronx headed to the Midwest
for his first day on the job Thursday.
Wall Street applauded the choice. St. Paul's stock climbed 9
percent, or $4.27, to $51.30 Thursday.
Standard & Poor's Equity Capital analyst Cathy Seifert said: "I
am encouraged by the news and I am hoping ... Mr. Fishman
greatly enhances St. Paul's long-term prospects. This removes
the succession issue" so the company can focus on the impact of
the Sept. 11 attacks.
$700 million in claims
Fishman's appointment comes weeks after the St. Paul
announced that it expects a whopping $700 million in claims as
a result of the attacks. it insured businesses and workers at the
World Trade Center and the hijacked aircraft involved. The
claims probably will wipe out profits for the year.
"They have sizable claims relative to their capital base," Seifert
said. "They have a significant exposure to the World Trade
Center. So speaking on behalf of the investment community
[Fishman] is a good move." It comes when the entire industry is
in the process of increasing rates by more than 15 percent.
The St. Paul's employees met their new CEO for the first time
Thursday morning. He immediately sought to put their fears to
rest. "This company is not for sale. This is a partnership, I am
here for the long term," he said. The room erupted in applause.
Fishman's journey to the St. Paul should not be taken lightly.
Said Leatherdale: "I told the board that this is a very real
candidate if you can convince him to leave [Citigroup CEO]
Sandy Weil."
Leatherdale said he'll continue on the St. Paul's board and his
work as chairman of the Minnesota Orchestra, board member
of UnitedHealth Group and Xcel Energy. He also will continue
his hobby of breeding Hanoverian horses.
Initial reluctance
Fishman, who holds undergraduate and graduate degrees from
the Wharton School in Pennsylvania, was a tough sell. When
recruiters first approached him, Fishman recalled, he told
them: "Forget it. It's a lousy company."
But he peeked in on The St. Paul's Yahoo chat room, checked
out agency surveys and reviewed the company's earnings.
"Whatever I said back then, I was wrong. That was my ignorant
belief," he said in an interview Thursday. "I got started really
looking at them this summer. I got out the public documents
and started reading them and I said, 'Hmm, this is not so bad.'
In fact I could see a pattern of financial strength and that they
had capital that could keep [them standing] when others
faltered."
He began quizzing agents about the St. Paul and took mental
notes when they praised the company, but complained about
the lack of new products.
"I said, 'We can fix this.' I came to the view a month ago that
this was a great platform and far-and-away better than
[Citigroup's acquisitions] Commercial Credit in 1989, and
Travelers in 1992 and Aetna in 1996," he said.
Fishman, widely considered Citigroup's No. 2 man and the
successor to Weil, 69, said Thursday that the succession plan
was "not clear. I love Sandy. He gave me the opportunity to
[build up to this]. Sandy's not going anywhere. And he has lots
of good people."
The St. Paul offered Fishman a chance to run his own
operation and to once again have "fun" molding a company
into better condition.
He has a thick head of salt-and-pepper hair and a direct
manner. He likes to get his own coffee and he doesn't believe in
wasting time.
Four main points
He will visit the St. Paul agents and customers this month and
will focus on four critical issues before the new year. Decisions
will be made about the company's international, medical
malpractice, standard commercial and reinsurance businesses,
especially in the wake of the Sept. 11 tragedy, which clobbered
reinsurers around the world.
He'll first tackle the medical malpractice unit, which has
hobbled the St. Paul's earnings for several quarters. He'll decide
to stay or exit that business by December. The St. Paul's
international business also faces scrutiny. Fishman doesn't
believe that the St. Paul's open-one-office-at-a-time
approach packs a competitive punch.
Perhaps most surprising is his fondness for the standard
commercial insurance business, which Leatherdale and his
troops took pains to reduce in an effort to refashion the St. Paul
as a global specialty giant after the 1997 acquisition of
Baltimore-based USF&G.
"I like that standard commercial business, and I think it's been
underinvested here," Fishman said. "There are Main Street
businesses, staionery stores, luncheonettes, dry cleaners, the
local Mail Boxes Etc. place, the local plumber and local
electricians. They all have insurance needs."
Fishman insists that agents will welcome SPC's change of heart.
The company has "done a great job of becoming a terrific
specialty carrier. Now let's go start reinvesting back into that
standard commercial business. Why not? Then we will be able
to walk and chew gum at the same time."
The St. Paul had $8 billion in 2000 revenue and $35 billion in
assets. It will announce third-quarter results in a few weeks.
-- Dee DePass is at ddepass@startribune.com .
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