Friday, March 27, 2015

Archive: September, 2010

POSTED: Tuesday, September 14, 2010, 9:05 AM

"Why should I talk to those people? They lie," said affable, number-crunching Theodore Aronson, founder of APO Partners, the most successful money management firm in Philadelphia (he's got the assets and the apartment to prove it.) Aronson was talking, to Barron's, way back in the late 90s, about why he doesn't much talk to CEOs and CFOs. I've used Ted's line before, and I will again. But of course we business writers all do listen to what the bosses have to say:

Ace Ltd. ceo Evan Greenberg is in Old City this morning visiting the North America headquarters of his Switzerland-, New York- and Bermuda-based insurance multinational. Son of Maurice "Hank" Greenberg who made American International Group the biggest U.S. insurer, Greenberg is busy boosting and buying businesses worldwide, including today's $1.1 billion acquisition of the 80% of Iowa-based Rain and Hail Insurance Service Inc. (they insure farm crops) that Ace doesn't already own.

Ace is big enough that the deal will have "no significant credit impact," though the company may be selling more bonds to refinance the deal, says veteran Philadelphia-based insurance analyst Jonathan Hatcher.

POSTED: Tuesday, September 14, 2010, 7:14 PM

Advent International, a big Boston business buyout firm that says it's invested $26 billion for the state of Pennsylvania and other pension and investor clients, says it's bought a chunk of Five Below, the tweeny Philadelphia-based dollar-store chain run by Zany Brainy veterans Tom Vellios and David Schlessinger. Advent plans to operate 142 stores by year-end, up from around 100 last year. Advent joins Ira Lubert-backed LLR Partners of Philadelphia as a buyout investor in Five Below.

Advent previously invested in the former Dollar Express (now owned by DollarTree) and Poundland (now owned by Warburg Pincus), among other dollar stores. Advent and Five Below won't say how much Advent invested or whether it paid a higher price than LLR and previous investors.

POSTED: Tuesday, September 14, 2010, 4:59 PM

"There are so many ways to screw up" an insurance company, says Evan Greenberg, New York-based chief executive of Ace Ltd., which counts Bermuda as its hometown, Switzerland as its current base, and Philadelphia as its biggest employment center, with more than 2,200 workers in Wilmington, Lafayette Hill, and at its North American headquarters a block from Independence Hall.

How do you wreck an insurer? By investing or marketing poorly; by failing to collect useful customer and industry data and use it quickly; and mostly by not charging enough, so that claims, when they come in, wipe you out.

That's what happened to Philadelphia's Reliance Insurance Group, which cost the industry a record $3 billion loss when it blew up at the start of the 2000s; or the state's major medical malpractice insurers, which failed in a series around the same time. Too often, insurers - like U.S. banks in the mid-2000s -- "lower standards in return for market share."

Instead, Greenberg says Ace is enduring the current "soft market" for business insurance by refusing to cut prices to meet rivals desperate for business at a time when the U.S. economy is slow. "You can't compromise underwriting discipline. You have to be willing to (lose) market share," he told me. "We have to be willing to shrink. And we've been shrinking for three years now" in some business lines.

"We're in the math business, product-by-product," says Brian E. Dowd, Philadelphia-based head of Ace's American businesses. "We're not anti-growth. But when the data says it's not time to grow, we're OK with shrinking." Ace's premiums total more than $1 billion a month.

The company has remained profitable; its share return is up an average 8 percent annually since just before the stock market collapsed in 2008, trailing US-based rival Chubb Corp., pulling even with its Bermuda rival XL Capital, and far exceeding longtime industry leader American International Group, Philadelphia-based health insurer Cigna, Radnor-based life insurer Lincoln National Corp., and most other big insurers.

POSTED: Monday, September 13, 2010, 1:22 PM

Susquehanna Growth Equity LLC, the three-year-old tech-buyout and growth-capital fund attached to the Bala Cynwyd investment trading giant Susquehanna International Group, says it's purchased JK Group Inc., a Plainsboro, NJ firm that sells software for corporate charity-management programs.

Husband-and-wife JK founders Roy Kaplan and Rita Kusler will stay involved with JK, but Susquehanna has brought in Brad Galle as JK's new chief executive. Galle (founder of the former Square Earth and AnswerU) "introduced us to JK," Susquehanna Growth partner Scott Feldman told me.

Susquehanna won't say what it paid, but Feldman says it's in the fund's usual range; the fund has invested a total of $120 million in 11 firms, in slugs from $5 million to $40 million. The fund has scored at least one profitable exit to date, Informatica's purchase of high-speed data service 29West, for more than $50 million in March, Feldman says.

POSTED: Monday, September 13, 2010, 11:28 AM

Internet analyst Scott Cleland (of Precursor Plc) has taken money from Verizon, Comcast and other paid Internet services to lobby against Google Inc.'s "alarming" search "monopoly" and what he regards as the value-destroying ideas of "Net neutrality" and "free content." 

But Cleland tells us his "first of its kind research study on the impact of the largest and most powerful Internet company, Google Inc., on the Internet, economy, pricing and jobs" is his view, not his clients'.

I asked antitrust scholar Michael Carrier, professor at Rutgers Law School in Camden, to review and comment on Cleland's high points. Here's the back-and-forth:

CLELAND: “There is no net-economic growth or job creation from Google’s “free” Internet sector model, only a deflationary price spiral, negative growth, property devaluation, and hundreds of thousands of job losses in over 20 industries. Consumers don’t win long term from a monopoly-gatekeeper of  'free' information access and distribution.”
  CARRIER: I disagree – a “free” model encourages creation and production.  That’s the model that Net Neutrality proponents have touted.  In contrast, they have worried that the Internet would become a closed model of the telco and media companies that would stifle such creation and dissemination.

CLELAND: “Many will be amazed to learn that when Google rebrands its current YouTube-Double-Click video advertising business as “Google TV” this fall, it already will own an Internet video-streaming monopoly with 80% of the Internet audience, almost a billion viewers, 2 billion daily monetized views, and 45 billion ads served daily.”  
  CARRIER: YouTube increases the number of outlets for video.  It has been very useful for amateurs to post videos online, and I view it as a useful addition to the video offerings out there.  I’m not sure what the video advertising business market looks like – what markets it competes with, how viewers take in these ads, etc.

CLELAND: “Lax antitrust merger enforcement is responsible for tipping Google to monopoly and facilitating its monopolization of consumer Internet media. If antitrust authorities do not wake up soon, a wide swath of a trillion dollar sector with millions of jobs – i.e. video, maps, books, analytics, travel, etc. -- will suffer the same fate as the music and newspaper industries.”
  CARRIER: I think that Google has reached its position more through having a product consumers want than through anticompetitive behavior.  That said, the Dept. of Justice should carefully evaluate future Google activity to see whether it would close off certain markets.

CLELAND: “While I expect the study to generate a healthy debate over whether Google’s behavior is pro or anti-competitive, pro or anti-consumer, and pro or anti-innovation, any rigorous analysis of the facts will lead to the same conclusion of this study -- that Google’s exercise of its market power is spreading to many other industries and spreading at an alarming rate.”
  CARRIER: These aren’t different industries in the traditional sense.  They may be different markets, and again this should be evaluated on a case-by-case basis.

The core recommendation of the study is that the U.S. Department of Justice’s Antitrust Division and the European Commission’s Competition Directorate should sue Google for monopolization.

(But) being big is not enough to be sued for monopolization.  To be liable for monopolization, a company must, one, have monopoly power and, two, commit predatory or exclusionary acts.  For particular markets, the DOJ thus would not bring a case unless it was confident those two elements were met.  The EU has been a bit more aggressive in recent years than the DOJ, but I am not aware of any interest on their part in bringing such a case either.

In short, explosive rhetoric.  And we do need to watch Google carefully with its future acquisitions, licenses, etc.  But this study, on first glance, seems a bit over-the-top to me.

Update: CLELAND: “Google has more video views every day than Comcast has Video on Demand views in a year... People are watching 2 billion videos a day on YouTube and uploading hundreds of thousands of videos daily. See Google has 1 billion users. See . Comcast has 23 million users. See

"Think about these numbers and the implications of them – my analysis is not over the top – its research-reality based... If Google’s view of the world succeeds, they will be the world’s monocaster, the world’s publisher and editor-in-chief and the decider of what people read view and learn."

Though as Google boss Eric Schmidt said when he came to Penn last year, people still have to pay Comcast (or Verizon, or Apple, or some other profitable intermediary) to watch YouTube. And to use Google.

Cleland operates the and Web sites.  His latest study is posted at, summary at

POSTED: Monday, September 13, 2010, 11:08 AM

Campus Apartments, Philadelphia, says it's going to build a $30 million, 413-bed, "midrise" coed residence hall and "Honors College" center, with a tower, for St. Joseph's University at the "southern entrance" to the school's 65-acre campus on City Ave. Campus boss Daniel Bernstein says he's looking for a general contractor to break ground next year and finish in 2012. He's also close to finalizing a larger project at a state school in central PA.

POSTED: Monday, September 13, 2010, 8:15 AM

Richard W. Vague, chief executive officer of University City-based Energy Plus, an electric power retailer that claims yearly billings will hit $150 million this year, has been funding reports and meetings for the Afghanistan Study Group, a group of ex-military and intelligence officers and professors headed by ex-Marine and State Department officer Matthew P. Hoh who have opposed the war in Afghanistan (many of them also questioned the war in Iraq).

More on the Group and Vague, a former JPMorgan Chase and Barclaycard executive who lives in Center City, in my Sunday Inquirer column here.

And previously, here.

POSTED: Monday, September 13, 2010, 4:29 PM

HealthNow Administrative Services, a King of Prussia-based arm of a group of New York State-based Blue Cross insurers, plans to hire up to 60 claims, billing and enrollment supervisors and other workers at its King of Prussia headquarters, and another 20 customer service positions in California, to manage its new contract with the State of California to manage its 25,000-person "high-risk" insurance pool created under Obama's Patient Protection and Affordable Care Act. More here.

The pools are supposed to be replaced after 2014 by state insurance exchanges, HealthNow says.

About this blog

PhillyDeals posts raw drafts and updates of Joseph N. DiStefano's columns and stories about Philly-area finance, investment, commercial real estate, tech, hiring and public spending, which he's been writing since 1989, mostly for the Philadelphia Inquirer.

DiStefano studied economics, history and a little engineering at Penn, taught writing at St. Joe's, and has written the book Comcasted, more than a thousand columns, and thousands of articles, and raised six children with his wife, who is a saint.

Reach Joseph N. at or 215 854 5194.

Joseph N. DiStefano
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