Business Men’s Assurance Company of America
Business Men’s Assurance Company of America
Wholly Owned Subsidiary of the Generali Group
Sales: $607 million
SICs: 6311 Life Insurance; 6321 Accident & Health
Insurance and financial services company Business Men’s Assurance Company of America (BMA) is a member of the Generali Group, one of the world’s largest insurance organizations. BMA serves individuals and business owners through the sale of life and disability insurance, annuities, and employee benefit programs. The company is one of the country’s top professional life reinsurers and offers investment products and services through subsidiaries as well.
The founder of BMA was W. T. (Tom) Grant. Grant grew up in Ellinwood, Kansas, the son of a homesteader who headed west after the Civil War. The Grant family had a long history, traceable back to Peter Grant of Inverness, Scotland, who in 1651 had been sent to the Massachusetts colony by Oliver Cromwell because of his support for Charles I. Growing up on a farm, Grant developed the characteristics that had long been associated with his lineage—hard work, self-reliance, independence, and frugality. One of Grant’s tasks at his father’s farm was to milk 20 cows a day.
Grant first became a bank clerk after graduating from high school. He was fired not long after he started when a stockholder thought his weekly salary of $5 was too high. For a short time Grant sold fire and hail insurance to farmers, but he decided to attend the Paris Exposition in 1900. After his return to the United States, Grant attended law school at the University of Kansas and was so highly regarded by his fellow students that he was elected president of his class. Rather than practice as a lawyer, however, Grant went back into the insurance business. At the age of 26, the young man was appointed a general agent for National Life of USA, an insurance organization that sent him to work in Colorado, Montana, and Pennsylvania before asking him to settle in Kansas City, Missouri, and establish a sales organization in the region.
One day in 1908, Grant received a flyer from Traveling Men’s Accident Association suggesting that traveling men needed accident insurance coverage. Impressed by the flyer, Grant made a number of sales calls and immediately saw that accident insurance policies garnered a significant amount of sales appeal. Soon the young man began to think about forming his own insurance company. Grant was well aware of the changes occurring during the early years of the 20th century and that such technological developments as the automobile would create new markets for the insurance industry. However, in order to start his own insurance firm, Missouri state laws required that any new mutual assessment association have a fund equal to the maximum benefit of the contract ($5,000). This state requirement meant that Grant had to put up $5,000 in cash or policies at $10 per policy for a company that did not yet exist. A remarkable salesman, in a very brief period of time Grant procured 531 applications for insurance to meet the state’s law for granting a charter.
In June 1909 the charter was granted by the state of Missouri, and the Business Men’s Accident Association immediately opened its doors to customers. For the next two months, applications began to arrive on a regular basis. Suddenly, in September of the same year, a policyowner was killed in a Texas train accident. The money that the company had collected as premiums had been used to pay for operating expenses, and the firm was unable to pay the policy. The firm faced a tough decision: either pay the claim and go out of business or refuse to fulfill its obligation to the policyholder and ruin its reputation. Grant’s new insurance company came under intense scrutiny. Fortunately, the firm’s board of directors guaranteed a bank loan to cover the claim. When news spread that the company had paid the policyowner’s claim, new applications for insurance policies at Business Men’s Accident Association came pouring in. The company had successfully weathered its first major crisis.
The company’s reputation for standing by its policyholders grew, and by the end of 1909 applications had more than tripled. But another crisis loomed after the addition of health insurance policies in 1911. The years at the end of World War I saw a flu epidemic unparalleled in U.S. history. Thousands of people were stricken and died, and claims made by policyowners strained the resources of the firm to its limit. Although the company suffered extensive losses, it met every customer claim that was presented. In 1918, Business Men’s Accident Association reported a total of $1.234 million in premium income. Having surpassed Grant’s goal of one million, the company was ranked first in the field of disability income.
Business Men’s Accident Insurance changed its name to Business Men’s Assurance Company of America (BMA) in 1920. The firm reported $150,000 worth of capital, with $50,000 established as a surplus. At the time, BMA reorganized as a stock life company. Shares were distributed to the employees, along with the opportunity to make additional money through dividends and stock splits. The goal of selling over $1 million worth of life insurance for one month was set and achieved. Grant was not a man to stand still, however. He implemented an expansion program during this time and opened the company’s first branch office in San Francisco in 1922 and a second office not long afterwards, in Salt Lake City, Utah. Applications for health and life insurance policies were pouring in, and by the end of the decade BMA was operating 13 offices in 30 states across the United States.
Although the 1930s began auspiciously, with the company moving into its first solely owned headquarters, the happy occasion was undermined by the debilitating economic effects of the depression. Every person and every business across the United States, including BMA, was affected by the worst economic crisis ever to hit the nation. Grant immediately saw the difficulties posed by the onset of the depression and implemented severe cost-cutting measures to keep the company afloat. Disability claims reached staggering numbers due to high unemployment. Grant responded by cutting policies altogether and by reducing accident and health premium income by half. Operating expenses were reduced by cutting all salaries 10 percent, and a new, extremely aggressive sales strategy for life insurance policies was implemented to offset losses in accident and health premiums. One of Grant’s most original ideas for collecting premiums occurred during this time when he set up a program, approved by the Federal Reserve Bank, to collect insurance premiums directly from the checking account of a policyholder. Called the Automatic Renewal Plan, it was the forerunner to today’s system of electronic funds transfers from one bank account to another. By 1934, even though the company found itself amid the height of the depression, Grant’s cost-cutting measures and sales strategy were wildly successful. During its 25th anniversary celebration, the company achieved a goal of selling over $100 million worth of life insurance.
BMA prospered during World War II. Immediately before the war, the firm became involved in the reinsurance business, and it received contracts from other companies. The firm was also intensely involved in the development of medical and hospital insurance and began to offer policies in both fields when Blue Cross and Blue Shield were established. From 1941, the first year of the war, until 1945, the company continued to develop this area of business, but it wasn’t until after the war that a department was created to handle all aspects of reinsurance. Grant was the driving force behind the company’s postwar move to expand into the reinsurance business, clearly recognizing the financial rewards of being involved in the field. His contacts throughout the Midwest helped BMA to develop into one of the country’s premier reinsurance companies.
The founder of BMA, Tom Grant, died on November 29, 1954, at the age of 76, after attending a violin recital at the Kansas City Conservatory of Music. Grant’s handpicked successor, J. C. Higdon, had already worked at the company for years and continued the general strategy that the founder had set. This included the sale of an extremely large variety of health and life insurance policies. With such a wealth of offerings, BMA salesmen had more opportunities to provide potential policyholders with better coverage at lower prices. Plans like Life Income at 65, Retirement Income, and the Junior Accident Plan, which cost a mere $6 annually, helped drive company sales upward. By 1955, Business Men’s Assurance Company reported that it had achieved its longtime goal of having $1 billion worth of life insurance in force.
The Grant family always played a large part in the development of BMA, and in 1960 this tradition continued with the selection of W. D. Grant, the founder’s son, as president and chief executive officer. Graduating from the University of Kansas and earning an MBA at the Wharton School of Finance at the University of Pennsylvania, Bill Grant started working at the firm in 1941. With the coming of World War II, Grant served in the U.S. navy as a officer in the Atlantic fleet. Upon his return to the United States after the war, Grant immediately resumed his responsibilities at BMA and worked his way up to vice-president by 1951. In 1956, he became executive vice-president and, in 1960, assumed the position his father had held since the company started operations in 1909.
One of the first decisions made under Bill Grant’s administration was to design and construct a new company office building. Uncharacteristic for a president of an insurance firm, Grant was intimately involved in the design and construction process from beginning to end. Grant insisted that the new offices not only consider functionality but also create a work environment that was comfortable and relaxing. BMA contracted the famous Chicago design firm of Skidmore, Owings & Merrill to do the work. When the building was completed the design firm suggested that the interior spaces be decorated with modern art, but Grant rejected the proposal for sound reasons. Grant was well aware that the building was near the beginning of the Sante Fe Trail, one of the old wagon roads filled with legends of the Old West— pioneer trains, cowboys, and Native Americans. Looking for a way to pay homage to and preserve that heritage, Grant collected Native American artifacts and famous Western paintings by renowned artists such as Peter Hurd and Frederick James. The result was one of the most stunning examples of American architecture and interior design created during the 1960s. The American Institute of Architects gave the BMA Tower its award for outstanding high-rise construction of 1963. Both the building and its interior have become so famous that they are included in many artbooks used throughout the world by students learning the elements of architecture and interior design.
For BMA the decade of the 1960s was one of expansion and acquisition. Under Grant’s direction, the company began to purchase and manage numerous real estate ventures across the United States. The firm also acquired television stations in Kansas City, Denver, Colorado, Sacramento, California, and Portland, Oregon. Along with acquisitions in the field of oil and gas exploration, the company expanded in the area of venture capital. In 1967, Business Men’s Assurance Company established the first U.S.-owned insurance firm in Australia. Grant’s expansion and diversification strategy provided nearly 40 percent of the company’s total profits by the end of 1969.
The 1970s were not as good to the company as was the previous decade. Rising costs for medical and hospital care affected the entire insurance industry, and BMA was not immune from this ominous trend. In order to help reduce the increasing rate of medical expenditures, the company developed programs in the areas of health assessment and wellness. The company’s most important strategy during this time was to keep health insurance affordable for employers and employees alike. However, by the late 1970s and early 1980s, record inflation and skyrocketing interest rates exacerbated the problem. The sale of new life insurance policies began to wane, and the cost of meeting the claims of individual health insurance plans increased. Profitability decreased as a result. Traditional life insurance policies were no longer practicable either for BMA or for its customers, and new policies such as interest-sensitive contracts were developed.
During the late 1980s and early 1990s, BMA repositioned itself in the insurance market. Moving away from medical and hospital insurance, the firm offered mainstream life and annuity programs. In addition, BMA began to concentrate more on the grey-collar and blue-collar markets in an attempt to attract more customers. Yet BMA still suffered declining profits, and in late 1989 the board of directors sought a buyer for the company’s insurance operations.
In 1990, the company’s insurance operations were acquired by Assicurazioni Generali, an international insurance holding company located in Trieste, Italy. Managers at Generali were very enthusiastic about the trends in the U.S. insurance market and supported BMA in its expansion into different and nontraditional insurance markets. With the Generali Group’s encouragement, the company continued its foray into fields other than medical insurance by entering the Guaranteed Investment Contract (GIC) market and by purchasing Jones & Babson, a no-load funds firm based in Kansas City that managed approximately $2 billion worth of investors’ money. In late 1994, BMA sold all its existing group and individual medical insurance business, in order to focus fully on financial services, life reinsurance, and non-medical insurance products.
By the mid-1990s, BMA reported over $1.5 billion in total assets. The company offered a wide range of products, from individual life, disability, and annuities to group dental, disability, and life insurance. The purchase of the company by the Generali Group had stabilized its financial position and allowed BMA management to concentrate on increasing its margin of profitability. With able management and the continued support of the Generali Group, BMA can confidently face the ups and downs of the U.S. insurance market.
Jones and Babson, Inc.; BMA Financial Services, Inc.
Grant, W. D., Aiming High, Newcomen Society: New York, 1984.
Holliday, Kalen, “Business Men’s Buys a Mutual Fund Firm,” American Banker, October 12, 1993, p. 15.
Koko, Linda, “BMA Repositions Portfolio Toward a Full Product Line,” National Underwriter Life & Health-Financial Services Edition, August 31, 1992, pp. 9-12.
——. “BMA Seeks Brokers With Flex Term,” National Underwriter Life & Health-Financial Services Edition, August 23, 1993, pp. 7-8.
——. “DI Plan Plays At 5 Different Levels,” National Underwriter Life & Health-Financial Services Edition, October 18, 1993, pp. 29-32.
Ward, John L., “An In-Depth Look at the Life-Health Insurance Industry: Past, Present, and Future,” Business Economics, October 1993, pp. 21-25.
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