O, what a difference

Rutherfoord continues unique innovations that resulted in its winning Agency of the Year

By Dennis H. Pillsbury

Rough Notes Senior Editor Nancy Doucette presents the Agency of the Year Award to executives of Thomas Rutherfoord, Inc. (from left): George (Shad) Steadman, President; Thomas D. Rutherfoord, Jr., Chairman; and Robert A. Bamberger, Executive Vice President of Sales.

Last year at this time, Thomas Rutherfoord, Inc., appeared on the cover of Rough Notes as our May Marketing Agency of the Month. The story of the agency delineated a history of innovation and creativity that has led to the agency’s current prominent position in its marketing area and clearly impressed its peers as our previous monthly winners voted to honor them as the 2004 Agency of the Year. In the last 10 years, the agency has increased its revenues from $7 million to more than $40 million.

Last year’s acquisition of Faulkner & Flynn, an environmental engineering consulting firm based in the agency’s hometown of Roanoke, Virginia, exemplifies the innovative approach to risk mitigation that has been the hallmark of Rutherfoord’s growth and its emphasis on value-added services. Since the acquisition, Rutherfoord has really been “expanding on the environmental side,” according to George (Shad) Steadman, who was recently named president and chief operating officer of the agency. “I don’t think anyone has what we have in this regard,” Shad continues proudly. “We’re heavier on the engineering side than on the brokerage side in this area. Our approach is to reach an engineered solution first before getting to the product. At Faulkner & Flynn we have an 80/20 ratio of engineers to brokers.”

This environmental expertise has enhanced the agency’s competitive position. “Our commitment to risk management and engineering services has enabled us to compete favorably with national brokers,” says Chairman Thomas D. Rutherfoord, Jr. He goes on to note that their growing expertise in the environmental field has led to “insurance companies providing us with referrals to do environmental work. We’ve also been approached by Fortune 500 companies to help them with environmental concerns.”

Shad continues, “We anticipate the environmental business to continue to grow rapidly. The Sarbanes-Oxley (SOX) legislation has had an impact in this area because of its requirement for balance sheet transparency. Companies have to report impaired properties as liabilities. There’s been a lot more activity in the cleanup area because of this as companies work to eliminate these liabilities.”

Tom Rutherfoord and Bob Bamberger share ideas with the editorial board at the meeting that took place on the morning following the awards dinner in Indianapolis.

In the last nine months, Rutherfoord has reorganized, Shad reports. “I am president and COO. Thomas R. Brown is chief executive officer. Bob Bamberger is executive vice president of sales. This is a recognition that our growth has required us to develop a new generation of leaders to make certain the firm is perpetuated. We’ve brought in a lot of division managers.” The agency now employs more than 250 people, all of whom are eligible to participate in the firm’s ESOP.

Shad is based in the agency’s head office in Roanoke, where the original agency was founded in 1916 as a partnership between Thomas Rutherfoord and Horace Maher. Tom Brown is based in the Richmond office and Tom Rutherfoord operates from offices in Alexandria, where he manages the agency’s government business, which includes programs for the U.S. State Department and for private companies operating in Iraq.

In addition to being honored as Agency of the Year, Rutherfoord also received the Torch Award for business ethics from the Better Business Bureau. Shad notes that this was especially gratifying in a year when the ethical behavior of some participants in the insurance industry has been called into question. “We felt like we’d been slapped in the face when things hit the fan,” Shad says, noting that Rutherfoord has always operated in a highly ethical manner and is very proud of the role insurance and risk management has played in helping the American economy grow and prosper.

“We’re also very pleased that Family Services recognized us for providing a family-friendly business environment,” Shad adds.

Insurance expertise and a strong emphasis on risk management have always been a key part of the firm, dating back to its start 89 years ago. When Thomas D. Rutherfoord, Sr., succeeded his uncle as owner in 1952, the agency had a large book of contracting business that grew with the building boom that followed the end of World War II. Thomas D. Rutherfoord, Sr., wasn’t satisfied with just providing coverage for his agency’s clients. He learned everything he could about the business and actually wrote one of the seminal books about bonding that was sold by the National Association of Surety Bond Producers to agents who needed to understand the business. He was recognized as one of the deans of the surety bond business.

Thomas D. Rutherfoord, Jr., joined the firm in the ’70s and faced a major challenge in the ’80s when a large book of railroad business “just went away,” Thomas R. Brown, CEO and grandson of the founder, says. (The railroads, disgruntled with a new form from Lloyd’s, banded together to form their own captive.) “We lost a segment of our business. We were also suffering through a soft market. At the same time, interest rates were very high and that was impacting the construction business. The agency was cut back in size. And Tom, Sr., handed the reins over to Tom, Jr., who faced a huge challenge.”

The Rough Notes editorial board includes representatives from previous winners of the Marketing Agency of the Month.

Tom Brown continues: “But Tom (Rutherfoord) never looked back. It was almost like starting from scratch. He operated from the Alexandria, Virginia, office. He recruited George (Shad) Steadman, who was in Florida, to run the Roanoke office. I was running the Richmond office. He and I went on a recruitment drive to attract talented producers. It’s been an amazing ride.”

Tom Rutherfoord, Jr., took over in 1986 and put together a plan “to plow earnings back into growth and build depth throughout the organization,” and that continues today as the reorganization has added a new group of young insurance leaders to the agency. As part of the effort to retain and attract talent in the agency, an ESOP was set up in 1992 “so that all of the employees would have an even greater interest in the success of the company,” Rutherfoord notes. “Acting as owners, they do the best possible job for the client. It has allowed us to attract top-level people in the industry. Many of our producers have come from the big brokers. The big broker environment stifled their entrepreneurial spirit and we offered them an opportunity to grow.”

In the past 10 years, the ESOP has grown in value with the agency. The share price has increased more than 300% in that time. “Most of the employees didn’t really think about the growth in the price of the shares when their 401(k) was also rising,” Tom Brown notes. “But our success really hit home when the stock market started dropping, but their stock in Rutherfoord continued to rise.”

As part of Tom Rutherfoord, Jr.’s effort to build depth throughout the organization, the organization “hired our first risk control person in a leap of faith and that became a catalyst for adding expanded risk control resources and claims people,” Tom Brown remembers. “We brought in claims professionals from Fortune 500 companies so we could take a stronger advocacy role for our clients. We monitor claims and get them settled quickly.”

The result of that effort was the formation of Assurance Services Corp. (ASC), which includes 17 claims and eight risk control specialists, who have experience ranging from small workers comp claims to catastrophic multiline claims. It provides services on a 24/7 basis that include:
• Cost containment
• Litigation management
• Customized tracking and reporting
• Regulatory filings
• Generation and review of loss runs
• TPA claims services for the Virginia Contractors Self Insured Group Association, Rutherfoord’s Captive Program, and others
• Multiline claims handling.

Rutherfoord recognized the need to be active in the alternative risk transfer market and about seven years ago set up a captive in Bermuda, which is managed by its Assurance Capital Corp. (ACC) unit. In addition to managing the captive, ACC also helps clients explore alternative risk strategies, including:
• Captives
• Self-insurance
• Reinsurer-led plans
• Risk retention groups
• Risk purchasing groups
• Finite risk
• Credit enhancement
• Loss portfolio transfers
• Integrated guarantee products
• Project-specific programs.

The agency’s large number of offices and employees has made innovative use of communications technology imperative. “We stay interconnected through video conferencing and internally with technology,” Tom Rutherfoord points out. “We have different practice groups that stay in touch regularly at all levels. We focus on bringing people together as part of our strategic process. In fact, our entire organization is involved in the strategic process. We recognize that great ideas can come from anyone and encourage all our people to submit ideas. When we present ideas, we ask our people for feedback. We want them to be involved from the start so that when an idea is brought to the table, there already is consensus.” *