Pan-American Life Insurance Company
Pan-American Life Insurance Company
Sales: $280.9 million (2001)
NAIC: 524113 Direct Life Insurance Carriers
Founded in 1911, Pan-American Life Insurance Company (PALIC) is a venerable mutual insurance company headquartered in New Orleans, where it owns the 29-story Pan-American building and the Hotel Inter-Continental. It is an international financial services company and one of the leading insurance underwriters in Latin America, with affiliates in Panama, Guatemala, and Columbia, and branch offices in Ecuador, El Salvador, and Honduras. In Puerto Rico and some Latin American countries, it is the oldest surviving provider of security products. In addition, ranked among the top 30 mutual life insurance companies in the United States, it is a major domestic firm and is licensed in 42 states plus the District of Columbia, Puerto Rico, and the Virgin Islands. It currently maintains 16 branch locations in nine states. PALIC has amassed $2.2 billion in assets and claims a surplus or net worth of $243 million, making it New Orleans’ top ranked private business. Having recently withdrawn from the healthcare insurance market, the firm now concentrates on individual and group life insurance, retirement plans, and investment products. Through its wholly owned subsidiary, Pan-American Financial Advisers Inc., it offers all brokerage and investment counseling services under such program names as IRA4u and TopHat4u and also sponsors 401k4u.com, an Internet site offering retirement information. Because of its long history of underwriting insurance in Spanish-speaking countries and territories, PALIC has a distinct market advantage among the growing number of Hispanic Americans in California and the Gulf and eastern seaboard states, and in recent years it has worked energetically to make significant gains in that special sector of the insurance market. Celebrating its 90th anniversary in 2001, Pan-American also began new advertising and marketing initiatives designed to enhance the company’s image in the domestic market and particularly in its home city of New Orleans.
Early 20th-century Beginnings
In 1910, Crawford Ellis, president of the New Orleans-based United Fruit Co., faced what seemed an insurmountable problem: how to provide insurance for his company’s employees who worked and lived in Central America. For decades, United Fruit had been importing bananas and other fresh fruits from Caribbean countries, a lucrative enterprise and one that had put the company in the front rank in America’s fledgling export-import trade with Latin America. In fact, by the beginning of the 20th century, United Fruit had established something of a dynasty. Its ships regularly crisscrossed the Caribbean, carrying bananas to the United States and returning to Central America with sundry export goods. In the process, United Fruit had invested millions in such countries as Honduras and Guatemala, where its overseers ran plantations and the company employed, not just U.S. citizens, but thousands of native workers.
From a later perspective, it might seem that United Fruit was engaged in a highly exploitive venture, but the truth is that it was doing many things to help the people of the countries with which it was trading. It built roads and bridges and helped fund banks and utility companies. Moreover, it brought thousands of Central American immigrants to the United States, paying for their formal education and helping them adjust to their new life. That the company’s impact was lasting is attested to by the fact that by the late 1990s, an estimated 100,000 people of Honduran descent were living in the New Orleans region; most of them could acknowledge the role played by United Fruit in bringing their families to the United States.
Back in 1910, however, insuring its native and U.S. workers in Central America had become a major stumbling block for United Fruit. Given the political turmoil and revolutionary climate of the Caribbean nations, U.S. insurance companies were adamant in their unwillingness to underwrite policies for persons working there, and the widely scattered Latin American insurance carriers offered only very limited help. Such was the quandary facing United Fruit.
As it turned out, luck was with Ellis. Right at the time that United Fruit’s problem reached a critical stage, he met E.G. Simmons, an itinerant physician who was visiting New Orleans on his sojourn through the South. A man with a vision, Simmons had been traveling across the region, making contacts in an effort to start up and fund insurance companies. He had already created one in Texas and was looking for new opportunities in Louisiana. After Ellis explained United Fruit’s problem to Simmons, the two men set out to form a group of local investors willing to fund a new insurance company that had a core obligation to underwrite insurance policies for the employees of United Fruit no matter where they worked. The two men soon joined forces with Marion Souchon, a physician on the staff of the Tulane University School of Medicine, and Eugene McGivney, a New Orleans attorney. With some other investors, these men raised $1 million to start up Pan-American Life.
1910–90: Eighty Years of Progress
The next year, the new company began writing policies in Central America, and within a couple of years was doing business in every Central American country except Costa Rica, where restrictive laws prohibited the underwriting of insurance by foreign-owned companies. When the Central American markets reached their maximum growth, Pan-American moved into South America, writing policies in Columbia and Ecuador. Then it ventured into the Caribbean basin, operating in Cuba, the Dominican Republic, Puerto Rico, and the Virgin Islands. When a relaxation of government restrictions permitted, the company circled back and began selling insurance in countries that formerly barred it from operating in them, including Mexico and Costa Rica.
Although from the outset Pan-American also sold insurance in the United States, for years the epicenter of its business was Latin America. As a result, it had to contend with a plethora of problems far less often faced by domestic insurance companies, including everything from bad weather and disease to government interference and insurgency. It even suffered the hostility of emboldened competitors in the home markets, companies that publicized Pan-American’s alleged exploitation of the poor in countries governed by immoral and greedy dictators. Despite such exigencies, Pan-American remained committed to its initial mission of making insurance available to both American citizens and natives working for American companies in South and Central America. In 1949, the year in which future chairman G. Frank Purvis, Jr., joined the company, 66 percent of Pan-American’s revenue was still generated through sales in Latin America.
Political unrest and natural disasters in Latin America took a toll on Pan-American Life throughout the 20th century. It was, for example, one of the first companies forced out of Cuba after Fidel Castro gained power there. According to PALIC chairman G. Frank Purvis, Jr., quoted in “Of Banana Boats and Republics” in World Trade in 1997, that expulsion cost the company “a substantial amount of our assets.” The economic instability of many Latin American countries also eroded Pan-American’s profits. Currency devaluation and rampant inflation at times reached 40 percent and even 50 percent in some countries, which had a major negative impact on the company’s business.
These problems led to a necessary change in strategy. PALIC began more aggressive marketing of its products at home. It also finally abandoned some Latin American markets, convinced that hostile government policies, political upheaval, and natural disasters were too common to risk further investment in them. Where possible, however, it did remain in Latin America, selling individual and group life insurance to foreign nationals and managing retirement funds. It also remained headquartered in New Orleans, a principal gateway to Latin America. United Fruit, on the other hand, did not. After several changes in ownership, it ended up as United Brands, headquartered in Cincinnati and operating under the Chiquita label.
1991–2001: Evolving in a Modern World
In 1995, Pan-American Life ranked second among the top 100 private companies in New Orleans. Its revenues for that year fell off somewhat, down to $547.7 million from $599.6 million in 1994. The company, lacking serious concern, attributed the decline to a 5 percent reduction in group premiums and a lower yield on its investments. New regulations in Florida, where the company sold policies, had softened that market and made it less attractive.
We Will—It’s the purest expression of what we do. It represents our commitment, our goals, and our vision. It is who we are. We will help people secure their financial futures. We will help companies find financial solutions for their employees. We will provide peace of mind through personal and financial performance. It’s nothing new for a company to say that it will do what it says it will do. What’s new is actually doing it, and doing it well. That’s performance. And performance is contagious. Anyone can make empty promises. But, like you, we’re not satisfied being just anyone. Performance just got better. We will.
By 1997, Pan-American had nearly 47,000 policies in effect through the Latin American and Caribbean regions, but that represented only about one-sixteenth of the nearly 8,000,000 individual and group domestic policies in effect. It remained committed to its south-of-the-border business, however, despite the fact that competition for Latin American business by U.S. insurance underwriters had begun heating up, thanks in part to an increasing privatization, a growing middle class, and the newly opened economies in Latin America. Company officials remained convinced that Pan-American’s longevity in the region and its reputation for surmounting various difficulties had won it the respect, trust, and loyalty of its Latin American customers and had left it in a commanding position to increase its business as market conditions continued to improve. The company knew the ropes, after all, and, through the efforts of people like Purvis, over the years it had also established lasting friendships with Latin American associates. Moreover, through trial and error, it had learned to tailor its products and services to the local mores and traditions of its customers, and, rather than invade the market with paper-waving gringos, it had hired local people to conduct its business. It also had developed the lesser markets—the rural areas and small towns—that its competitors simply lacked the experience and cultural sensitivity to tap into successfully.
In 1998, Pan-American decided to withdraw altogether from the domestic health insurance sector to focus on life insurance and retirement planning. At the time, the company had about $1.9 billion in assets and $246 million in total adjusted surplus. It indicated that its decision was part of its overall strategic plan for its remaining underwriting and planning units. According to John Roberts, Pan-American’s CEO and president, company executives realized that the mutual firm would not be able to attain sustainable growth in the domestic health insurance industry. Although the company’s group accident and health insurance business had been profitable through 1994, thereafter that sector of its business had become a burden, producing losses of $6 million in 1996 and $6.3 million in 1997. Estimates were that without the financial drag that sector created, in 1997 the company would have posted an operating profit of about $16 million. While not divulging terms, Pan-American agreed to sell, in September 1998, almost all of its small group health insurance business to United Wisconsin Services of Milwaukee. It would, however, continue to offer health insurance in the eight Latin American countries in which it was still licensed.
In fact, Pan-American Life continued to provide a wide range of healthcare products to individuals and groups, including companies, throughout Latin America and the Caribbean. Included were indemnity products, preferred provider organization, and point-of-service plans. The company also had negotiated a fee schedule with more than 200 hospitals in Latin America and more than 7,000 healthcare providers.
Though perhaps in a very tentative way, in 2001, Pan-American seemed to be once again testing the domestic health insurance business. In May, L& A Services Inc. of Phoenix, Arizona began marketing a basic employee benefits plan for small businesses unable to afford costlier, more comprehensive plans. The indemnity offering was made through Pan-American and used the Galaxy Network of more than 2,500 Arizona physicians. The benefits plan was designed for people like hotel employees who normally were unable to get any coverage at all. Whether Pan-American will play a future role in similar indemnity offerings remains uncertain.
According to the company’s web site, by the century’s end Pan-American Life had become financially stronger than at any time in its long history. It had achieved a high, 11 percent ratio of surplus to assets—more than four times the minimum surplus level defined by the National Association of Insurance Commissioners—plus a solid diversification of those assets. It also was committed to shaping a new vision for the future, remolding itself from a financial services firm into a personal and financial performance company. As the new century began, the company also launched a new campaign, replete with a redesigned corporate logo and branding policy focused on what it designated its new “We Will” attitude. In March 2001, in part to publicize its “We Will” strategy and commitments, the company began a year-long celebration of its 90th anniversary.
National Insurance Services Inc.; Pan-American Financial Advisers Inc.
Pan-American Retirement& Investment Services.
Citizens, Inc.; Credicorp Ltd.; FleetBoston Financial Corporation; GenAmerica Financial Corporation; Standard Management Corporation.
- Crawford Ellis, E.G. Simmons, Marion Souchon, and other investors found Pan-American Life; company begins servicing Panama.
- Pan-American begins writing policies in other Central America countries.
- Company begins service in Puerto Rico.
- G. Frank Purvis joins the company.
- Company stops underwriting domestic health insurance.
Gonzales, Angela, “Benefits for Small Business,” Business Journal—Serving Phoenix& the Valley of the Sun, May 11, 2001, p. 11.
Niedzieldski, Joe, “Pan-American Life Exits Health Ins. Market.” National Underwriter Life& Health—Financial Services Edition, April 13, 1998, p. 39.
“Serving Companies and Individuals,” Latin Trade, October 1998, p. 82.
Welsh, James, “Of Banana Boats and Republics,” World Trade, January 1, 1997, p. 16.
—John W. Fiero