No. 1 credit insurer hopes to raise profile with growth plans


December 29, 1993|By David Conn | David Conn,Staff Writer

H. Michael Cushinsky is a stocky, animated guy with a broad smile and a dream in his heart: to expand his market and sell his product all over the country. Trouble is, most of his potential customers haven't even heard of his product, much less the name of his firm.

Which is odd, considering Mr. Cushinsky's company, the Baltimore-based American Credit Indemnity Co., this year celebrated its 100th year in business. Now a division of New York-based Dun & Bradstreet Corp., ACI employs about 285 people -- more than half in Baltimore -- and commands a 70 percent share of its market nationwide.

"We are the oldest, largest and only dedicated provider of business credit insurance in the United States and Canada," Mr. Cushinsky proclaimed matter-of-factly, and no one disputes him.

The problem is, even a 70 percent market share adds up to only about $60 million in annual gross premiums. (By contrast, USF&G Corp. had more than $600 million in gross premiums in the third quarter alone.)

Despite its long history, ACI's product -- insuring against the nonpayment of accounts receivable -- hasn't really caught on yet in the United States, where market penetration is less than 5 percent, most of it concentrated near New York and, to a lesser extent, in California.

In Europe, by comparison, credit insurance is purchased by between 15 percent and 25 percent of potential buyers.

"Ninety-five percent of all independent insurance agents out there in the United States don't know what credit insurance is," said Jan Buchanan, head of marketing and agent relations at rival Maryland Netherlands Credit Insurance Co., a Baltimore-based partnership of the Fidelity & Deposit Co. of Maryland, and the NCM Group in Amsterdam.

"You have to create that knowledge base first before you go out and pitch it," Ms. Buchanan said.

That's Mr. Cushinsky's next job. Until now, he's had to spend his time shifting a profitable but stagnant company into an expansion mode.

ACI was started in St. Louis in 1893 and moved to Baltimore in 1940, four years after its purchase by Baltimore-based Commercial Credit Co. It went through two more owners before Dun & Bradstreet bought it in 1988.

"ACI had always had a high rate of profit, generated lots of dividends for the parent, but had virtually no growth in real terms," Mr. Cushinsky said.

"The company had gone to a particular level and stayed there,"recalled Ron Glover, who until recently was president of Dun & Bradstreet Information Services North America, to which ACI directly reports.

"We looked at it and said, 'Gee, we think there's tremendous opportunity because the amount of market that's being used [in the United States] is very small" compared to the share in Europe, Mr. Glover said.

Working through a recruitment firm, Mr. Glover found Mr. Cushinsky finishing up another turnaround job at an insurer in New York. Mr. Cushinsky got the call from Dun & Bradstreet one month before his company was sold to another, so he was in the mood to relocate.

"When you're used to having the reins in your hands," he said, "you don't like to sit in the back seat." Besides, the 46-year-old Boston native added, "Baltimore actually reminded me of Boston -- a much more manageable place than New York."

In 1990, the year Mr. Cushinsky arrived, ACI had about 420 employees and annual premiums of $67 million. But it had reported its second straight year of underwriting losses (not including gains from investments), and had a pre-tax operating loss of $7 million that year.

ACI also had grown a bit bloated and inefficient. While the ranks of middle management expanded, automation was virtually ignored.

So when the recession hit, and the rate of business failures skyrocketed, that inefficiency was felt keenly. In 1990 it lost 26 cents on every dollar of premiums it collected.

Mr. Cushinsky moved quickly to stem those losses, bringing in new management, reshuffling existing staff and letting some people go. The company changed its compensation formulas and, most importantly, tightened its underwriting and pricing policies. Recently, it moved from the Commercial Credit Building to the fifth floor of the IBM Building downtown.

In 1991 the company had cut its loss to 10 cents for every premium dollar, and this year it expects to make about 15 cents on each dollar of premiums sold. Operating profits this year are expected to reach $15.5 million. Some of those gains are from the collection of bad debts from prior years.

The recession did have a bright side: It raised the profile of credit management needs among all companies, and it enhanced the value of credit insurance as a tool for companies that were suffering from the credit crunch.

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