CEOInterviews.AIThe Mutual Advantage in a Cyclical Market | Kevin Ingram, CFO, FM

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Daniel Bisgar0:00

Hi, it's Daniel Bisgar, CFO of Constellation, and you are listening to the CFO thought leader podcast. This is episode 1097. I think sometimes we fall back to doing things the same way and not taking advantage of technology. As a result, we make investments without driving benefits. Another thing we started focusing on 18 months ago is measuring and ensuring we achieve the benefits we set out before outlaying capital. If we aren't achieving the benefits, we pull the plug early. Make hard decisions earlier in the process.

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Narrator0:57

For nearly 10 years, Kevin Ingram knocked on S&P's door, arguing that FM's A+ rating undervalued its balance sheet. Other rating agencies such as Fitch had rated FM as double A. Last summer, 6 months after FM dropped global from its name, S&P finally moved, lifting the insurer to double A minus. Along the way, Ingram championed a philosophy that capital is our product. FM's capital climbed from $12 billion in 2014 to $26 billion today, while its exposure grew far more slowly. You'll hear that and much more on today's episode. Our talk with Kevin Ingram begins after this.

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Jack2:38

Hi, it's Jack. Today we welcome back Kevin Ingram, chief financial officer of FM, the commercial property insurer, formerly known as FM Global. Since becoming CFO in 2016, Kevin has overseen capital management, finance, operations, and risk modeling over more than 25 years with the company. He has also led FP&A, international finance, and corporate services. Kevin, welcome back.

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Kevin Ingram3:07

Thanks, Jack. It's great to be back.

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Jack3:10

So, we have to begin with the rebrand. What strategic gaps did the July 2024 rebrand from FM Global to simply FM aim to fill?

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Kevin Ingram3:30

Well, look, it's interesting. The name FM Global was chosen in 2000 or 1999 when the company was formed from a merger of three mutual insurance companies and two jointly owned subsidiaries. We wanted to make sure we were a US domiciled stock company and that our policyholders knew we were a global organization. 25 years later, we no longer need to emphasize that because we are clearly global. FM is the more appropriate name, so we rebranded.

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Jack4:20

S&P upgraded FM to a double A 6 months after the rebrand. Is that right?

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Kevin Ingram4:27

Yeah, double A minus. The double A minus.

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Jack4:30

Which capital management shifts or model refinements were most influential in earning that upgrade?

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Kevin Ingram4:40

I may be the wrong guy to ask because I have a biased opinion of S&P. We have had an A+ rating from S&P since 2014 or 2015. My personal view was that rating was too low. I've been talking to them for 10 years. Over that period, our capital grew from $12 billion to $26 billion, while exposure grew much slower. So I've been arguing that the rating should be higher. Finally, S&P agreed. They initially said changing it would admit they were wrong, and I said that's because they were wrong. The company has been hugely successful, and S&P finally recognized that. We're pleased, but it won't make a big impact on the business.

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Jack6:32

You have often linked engineering spend to lower loss costs. Has the rebrand altered the metrics you track to prove that equation?

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Kevin Ingram6:43

No, the metrics haven't changed. I was initially against the rebrand because of the cost, but it has been a huge success. The logo is sharper and it will pay dividends, but the underlying fundamentals haven't changed. How we manage and monitor benefits remains the same.

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Jack7:36

FM launched a renewable energy unit and folded some entities under the same umbrella, like cargo and boiler and machinery. How does finance balance capital between these risk pools?

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Kevin Ingram8:00

Everything relates to commercial property, one line of business. We segment into different areas like renewables, cargo, mutual boiler, etc. But from a capital management perspective, it's all for the benefit of our commercial property policyholders. Our capital level is very high relative to peers, so capital allocation is not onerous.

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Jack9:14

FM's mutual structure lets you prioritize retention over quarter-to-quarter earnings.

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Kevin Ingram9:22

It also allows us to not focus on topline. We don't have to worry about shareholders or analysts. We can focus on writing business with clients aligned with our risk improvement approach. The mutual structure gives us higher retentions and more volatility, but long-term it has been the right structure for capital growth and profitability.

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Jack11:06

In an inflationary environment, how do you decide when to absorb costs for policyholders versus passing them through rate changes?

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Kevin Ingram11:27

We have to be market competitive. In a hard market, our rates have gone up but not as much as others because we manage increases as a mutual. When rates dropped, ours didn't drop as quickly. Our mutual structure gives us flexibility. Regarding inflation, a bigger issue is loss cost. Tariffs could increase reconstruction costs. We factor that into pricing. It's a wait-and-see situation.

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Jack13:36

When we last spoke, we were coming out of COVID. Where was FM as far as hybrid workforce?

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Kevin Ingram13:52

We were 100% remote during the pandemic. We started bringing people back on a three-day-a-week basis in 2021. We've since moved to being office-based with flexibility, expecting people generally 5 days a week. My finance staff is in the office 4 days a week, with everyone present Monday, Wednesday, Thursday, and they work virtually on Tuesday or Friday.

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Jack15:08

Were there any productivity metrics that led you to move to work-in-place?

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Kevin Ingram15:18

Our people in their 30s to 40s said they could work effectively remotely. But before the pandemic, they benefited from impromptu meetings and collaboration. In a fully virtual environment, everything is scheduled, collaboration suffers. We felt it would affect our culture long-term, so we moved back to office-based.

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Jack16:19

How has FM integrated AI into its strategy?

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Kevin Ingram16:40

We have many engineers who inspect facilities and write loss prevention reports with hundreds of data points. We have 180 years of loss experience. We combine that data to better serve clients. For example, AI helps prioritize risk improvement recommendations for our clients.

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Jack18:36

Are other departments asking for investment in AI capabilities?

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Kevin Ingram18:55

We have ramped up AI resourcing. But we are very protective of client data. We blocked access to external AI tools and built our own sandbox to control data flow.

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Jack19:53

Where is AI having the greatest impact on your finance function?

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Kevin Ingram20:01

Same as any finance organization. Menial tasks like financial statement reviews, writing footnotes, transactional items can be automated with AI. That has made a big difference.

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Jack20:37

FM's 2024 outlook mentioned rapid AI adoption as a top trend for industrial clients. Is the new brand helping package AI-driven services?

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Kevin Ingram21:04

The rebrand is just a rebrand. AI efforts are independent. We aren't getting more or less traction from the brand.

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Jack21:20

What single KPI will tell you in 12 months that the rebrand succeeded?

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Kevin Ingram21:35

No single KPI. We talk to our 1,600 main clients. So far, feedback has been very positive. Was it worth the cost? Our CEO would say yes.

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Jack22:43

How do you personally reach out to clients? Do you play golf?

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Kevin Ingram23:14

Yes, I play golf with clients. We also have advisory boards. I make presentations to them every February and March. We also sponsor an LPGA event. I play in the pro-am. It gives exposure to clients and brokers.

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Jack26:30

How do you view this latest chapter of your career? Rebranding, AI, or something else?

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Kevin Ingram27:18

It's the tail end. I'm approaching retirement after 35 years. The company has never been stronger. We went through a tough re-underwriting after 2017-2018, and now we are in a position of strength. This chapter is about being opportunistic and not returning to the soft market.

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Jack29:05

What comes to mind when we ask for a finance strategic moment?

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Kevin Ingram29:10

Our product is our capital and capacity. I help clients understand our balance sheet by explaining assets and liabilities in simple terms. For example, investment portfolio is marked to market, no overstatement risk. Our liabilities are short duration because we are property-only. That helps them see our capital is conservative.

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Jack30:48

How do you discover that language?

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Kevin Ingram31:10

When I talk to advisory boards, I speak as a CFO to CFOs. I explain capital management. I've had clients thank me for helping them understand insurance. I demystify it.

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Jack34:21

Which emerging risk keeps you recalibrating your capital model? How should CFOs prepare?

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Kevin Ingram34:40

Supply chain and climate have the biggest impact on our loss costs. For climate, understand your exposure today and forward-looking. As climate changes, areas change. We help clients protect facilities. Take a long-term view.

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Jack37:11

What skill or mindset do you want your finance team to strengthen?

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Kevin Ingram37:22

Leverage technology and ensure we achieve the benefits from investments. If not, pull the plug early.

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Jack38:22

Kevin Ingram, thank you for joining us on CFO Thought Leader.

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Kevin Ingram38:25

Thank you, Jack. I appreciate your time.