Commerce & Mapfre: A Merger Made In Heaven?
Anytime a local company is acquired by a larger firm, there’s concern over the fate of the employees.
And beyond the loss of jobs, there’s also the secondary impact new ownership can have on local industry.
So, there were many who held their breath after it was announced last year that Webster-based auto insurer Commerce Insurance was going to be acquired by the Spanish insurer Mapfre.
Steady So Far
But so far, employment levels appear to have stayed the same locally. And while Commerce has changed how it does business, that has more to do with managed competition (see related story on this page), then its Spanish owners.
Mapfre is the largest Spanish insurance group and operates in 45 countries. It’s represented by more than 63,000 agents and brokers worldwide and has more than 34,000 employees.
“My feeling is Commerce has changed, but all of the large insurers have had to change their approach because of managed competition,” said Francis Mancini, president and CEO of the Milford-based Massachusetts Association of Insurance Agents.
“We have noticed a significant change in the way they operate, but they’re still an agency company and they’re still the largest writer of automobile policies in the state.”
Managed competition was put in place last year, reversing a tradition in the state that reaches back to the 1920s.
Under the old system, the insurance commissioner set auto insurance rates, and Commerce was able to lock in about a third of the state’s auto insurance business.
Today, Commerce is still the most dominant player with a 30 percent market share. It wrote $1.1 billion in auto insurance premiums last year.
With the new, more competitive system in place, Commerce has “stepped up to the plate with innovative and creative products,” Mancini said.
When the Mapfre deal was announced, Mancini said many insurance brokers in the state began “scouring” reports to learn about the new player and how they do business.
“Whenever there’s a change at the top, I wouldn’t call it a concern, but I’d say there’s a curiosity,” he said.
Status Quo
Mapfre closed on the acquisition of Commerce in June 2008. The deal was valued at $2.2 billion and marked the end of local control at Commerce, which had been founded in Webster in 1972.
Despite initial trepedation, Mapfre seems to be adhering to a hands-off approach, leaving much of the staffing the same.
“All of the people at the marketing level that deal with the agents have remained the same,” Mancini said. Executives at Commerce could not be reached for comment for this story.
In the town of Webster, Commerce occupies a historic building on Main Street. Any dramatic shift in the company’s workforce would be felt throughout the small community of nearly 17,000. Commerce employs approximately 1,800 people.
“They’re our biggest employer and we feel they’re an excellent neighbor,” said John McAuliffe, Webster’s town manager.
A major move by Commerce could hurt an already vulnerable town. Webster’s unemployment rate was 10.7 percent as of May 2009. That’s more than 2 percentage points higher than the state average of 8 percent.
Webster has been hurt by the recession, most notably when the Cranston Print Works, a Rhode Island company, announced it would shutter its Webster plant, eliminating 70 jobs.
Of course, Mapfre hasn’t been totally hands off. In May, Commerce announced that it would keep its name, but introduced a new logo that includes the phrase “A Mapfre Company.”
The new logo with the nod to its Spanish parent is slowly being introduced over the next year, first online and later in marketing materials.
Financially, Commerce’s new parent company has hit difficult times in the recession.
According to a report from Dow Jones Newswire, Mapfre’s Chairman Jose Manuel Martinez caused a stir in the financial markets when he said that the company would not be able to reach its 2009 revenue target of EUR 18.5 billion because of a sharper-than-expected economic downtown in the its home market of Spain.
The credit rating group A.M. Best Co. also revised its outlook for Commerce from “stable” to “negative” based on weakened capitalization at Mapfre.
The rating agency affirmed its A+ financial strength rating of Commerce, but it also said the company’s ratings were hurt by its concentration of business in Massachusetts and its limited product scope, which focuses on car insurance.
Overall, Mapfre’s revenues for the first quarter of 2009 were up 8.7 percent to EUR 5.4 billion from the same quarter last year, while its net profit rose 0.2 percent to EUR 287 million.
Regardless of financial results at Mapfre, from the perspective of John Curran, president of the Worcester-based insurance agency Sullivan & Garrity, not much has changed at Commerce.
“I could not tell someone else owns the firm,” Curran said. “They left management in place and it’s the same rules and regulations from before.”
Sullivan & Garrity has about 50 employees and offices in Worcester, Cohasset and Chatham.
But Curran also expects Commerce to change down the road as more competition moves into the auto insurance market in the state and as the company gets more direction from its Spanish parent.
“Right now, they’re leaving it as is because they (Commerce) is making money,” Curran added.
“If it’s not broke don’t fix it.”
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