An Hour With Sy
Any hour with Sy Sternberg is a crowded one. Mine was–around his world in 60 minutes mining nuggets of insight. A heady one too, interupted perhaps by the phone call from a Congressman who he lobbies intensely. Words, uttered casually, drift across the room, “As I said to the President last week…”
For those who’ve been out of the galaxy, Sy Sternberg is Mr. Everything (chairman, president and CEO) at New York Life Insurance Company, the nation’s fifth largest life insurer. He’s also the outgoing chairman of the American Council of Life Insurers. I interviewed him in his office above Madison Square recently. This is some of what he had to say.
On globalization. Little known fact: New York Life was a global business in the early 1900s. Sternberg shows me a framed policy, dated 1910, itself framed by the flags of some 60 countries it did business in then. Came World War I and it withdrew until 1988, though things didn’t heat up until 1997 when Sternberg weighed U.S. market penetration and population growth projections and decided that if NYL was to be the company it wanted to be and still generate double-digit, top-line growth, it had to take its skills and competencies aggressively global.
“Rather than compete against people we don’t know how to compete against and replicate other businesses,” says Sternberg, “I felt a lot more secure to take what we have and leverage it into high-growth, emerging markets.” To do that, he says, you have to put capital on the line. “You can’t do it on $100 million.”
The company parlayed an initial investment of $1 billion into an overseas empire today centered on Asia and Latin America. “The fundamental metric,” says Sternberg, is that as of year-end 2000, 32% of new life premiums came from the international side. Of NYL’s $1.2 billion in new business, close to $400 million came from the global side.
On mutuality. Why remain a mutual? First, the company has plenty of capital, more than $8.5 billion in surplus, $6 billion of which secures its triple-A rating, leaving $2 billion for strategic investment. Second, Moody’s specifically references the company’s old-fashioned, traditional, participating whole-life policies, its biggest seller.
“Since the equity market fell and the bull market collapsed, our sales in traditional whole life, dividend-paying policies are up more than at anytime since I’ve been with the company,” he says.
That product, he explains, can’t be supported by a demutualized company. He waxes philosophical: “I really believe the mutual structure is most appropriate. The industry’s products are unique and share a common element: a promise to pay a benefit perhaps 20 or 30 years down the line.”
Who owns a stock company? he asks. Day one, it may be the policyholders, “but five years from today, it’ll be institutional holders and mutual funds and pension plans who don’t care about 20-30 years from today.” To Sternberg, “that’s a conflict”: long-term stability vs the short-term expectations of the stockholders. “Hence, we stay mutual.”
On distribution. There’s no better way to differentiate his company, says Sternberg, than the career agency system, “not only because of better sales and persistency and loyalty to strategy, but because it projects our brand better than the brokerage system.” NYL has 7,200 active agents and a remarkable 2,400 members of the Million Dollar Round Table, which it has led in members for 47 consecutive years. It continues to grow the agency force, whose life sales are up 15%. It also uses some alternative channels: banks and stockbrokers for annuity sales, broker-dealers and wire houses for mutual funds, and some brokers. At the low-end, it’s an exclusive writer of life insurance for AARP, making it (another little-known fact) the largest direct writer of the line in the U.S.
On Financial Services. “No ambiguity on this,” says Sternberg. “Everybody decided to ride that train. We found no need to do that.” Life insurance remains its most important product, the one it knows best and he hopes “no one gives it up.” He warned agents the bull market would break one day and if they lost their selling skills, all they’d know how to do is take orders for mutual funds and annuities. “Selling life insurance is your immunization against that,” he tells them. “Ours is for agents to know this product.”
And so it went, breathlessly, for an hour. And there we had to end it. Not because the dynamic Sy had lost steam, but because, unsurprisingly, he’d lost his voice.
Reproduced from National Underwriter Life & Health/Financial Services Edition, December 3, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.