Remembering Dinos Iordanou

This was not at all what I had planned to write about this week, but I don’t think there is anything else I could write about now other than the loss of my friend, Dinos Iordanou, who passed over the weekend at age 74.

This is hard to write, not just on a personal level, but given the diversity of the audience. Many of you reading this knew Dinos well, while some others may not at all.

Of those that knew him, an even smaller group knows about my relationship with him, and many of those probably think first of our banter on earnings calls which was a rather small part of it.

So what I will try to do is provide some background for those less familiar, as well as sharing some personal stories and impressions.

It’s going to be long, yet I will leave so much out that I’ll surely recall in the coming days. I’m not sure how well I’ll do tying everything together, but will give it my best.

The American Dream

I wish Dinos had written an autobiography. He lived a movie script.

He was fond of telling stories about growing up the son of a police officer in Cyprus. He came to the US over 50 years ago with nothing and worked his way through college at NYU.

He made himself a fortune he surely never imagined possible when he got on that boat.

He started at the bottom of the insurance industry in the mid 70s, in an entry level role at AIG, and left at the top having built Arch into the most successful new company in the industry in decades.

He was mentored in insurance by Greenberg and Buffett – of itself, a great feat – but what he built on his own at Arch was no less impressive. It is no hyperbole to say he became a peer of his old mentors.

He was incredibly driven to succeed. He didn’t let everyone see that with all the entertaining stories and self deprecating humor and deflecting credit to his team, but don’t let that fool you. He wanted to win.

You don’t get taken under the wing of Hank Greenberg if you’re not ambitious. By the way, with Arch’s market cap now within $10B of AIG, Arch could surpass it someday.

I am guessing Dinos began to keep track of that, and I wish he were around to see that day it happens.

Based on some quick research, I believe Arch is the most successful insurance company built by a first generation American since Chubb in the 1800s. If that’s not a success story, I don’t know what is.

If you want to read more about his formative days, I found a great story on him from about ten years ago here.

Early Days At Arch

I first met Dinos in 2002. He had been brought in by Paul Ingrey to grow Arch as a pseudo start up after 9/11 (pseudo in that it already existed, but largely as a shell – this proved a big edge as it had licenses and infrastructure in place while other startups were still looking for office space).

Ingrey was himself a legendary insurance executive and was the original face of Arch. But it quickly became clear Dinos was going to be doing the heavy lifting.

At the time, this was widely perceived as a negative. People wanted to invest with Ingrey. He was as big a name as there was in the reinsurance world.

Dinos’ reputation wasn’t great at the time. He was not a known commodity to investors and had a mixed run at Zurich, due to events not always in his control, which turned a lot of investors off initially.

Many people heard Zurich and stopped listening, assuming he wasn’t any good. This proved to be a big mistake.

Fortunately, I didn’t have any of this baggage. I was new to insurance at the time and was constantly meeting with all the new companies formed after 9/11.

All I knew was whenever I talked to Dinos (and John Vollaro, the CFO) the story always sounded good and they sure seemed to know what they were talking about.

Since I was still learning my way, I would ask others what they thought. The answers were almost always Axis and Montpelier had better management than Arch or “why even mess around with these newcos when you could buy XL or PartnerRe?”.

Markets don’t always get it right on the first try!

Luckily (or perhaps skillfully), I got past those reservations and made up my own mind. The command Dinos had of the business got me on board.

There was also a lot of skepticism about their growth, particularly outside cat. Even though it was a raging hard market, people were convinced they were putting on bad growth. It was crazy!

What many of us learned later was Arch compensated its underwriters based on ultimate reserve development, so they would be punished long term for growing unwisely.

I recall the frustration from Dinos and John when people were doubting them. They were trying to build a franchise rather than just a cat hard market play, which would ultimately prove far more valuable.

They would throw around all kinds of metrics to try to convince investors they were being disciplined (I can’t tell you how many times I heard about the quote to bind ratio!) without much luck, but, hey, it at least convinced me.

There were also the early visits to Bermuda where we would get into even more detail. I vividly remember meeting (and being impressed with) a young Marc Grandisson (who Dinos pulled out of Berkshire to build the reinsurance business) who would share how they evaluated price adequacy by line of business based on their internal return metrics.

The recurring theme was Arch measured what mattered and built discipline into their structure to prevent bad decisions. This was a big part of what made them successful.

But these were definitely the garage band days. Only a few of us “discovered” Arch and believed early. Don’t let anyone else tell you otherwise.

The good news for me was I think Dinos always remembered that early support.

Going Mainstream

So when did Arch become the Arch that people think of today?

It was an evolution, but the first leap was after Hurricane Katrina. Arch had much lower losses than the other reinsurers. That woke people up. The narrative about them writing bad business was over.

This was also around the time that Dinos started to show more of his personality with investors who began to realize, if you wanted to understand something topical in the industry, you asked Dinos for his opinion.

The next leap was after the financial crisis. With XL and AIG struggling, investors began to look elsewhere for leadership. As Arch continued to be a steady ship with consistent results, investors began to gravitate towards it. This is when Dinos started to be seen as an industry leader.

Arguably, the biggest step was the entrance into mortgage insurance last decade. This proved to be a strategic masterstroke where Arch added a diversifying business at very low cost which Dinos famously referred to as the “three legged stool” (insurance, reinsurance, mortgage).

Many insurance companies diversified either to grow their empires or to arbitrage capital models. This often ended in tears, as they would inevitably make bad underwriting decisions because they lacked the proper risk framework.

At Arch, diversification was about cycle management. Dinos was the last of the cycle managers.

When one of the three businesses faced increased pricing pressure, Arch would pull back rather than chase low return business. They would then redeploy capital into one of the more attractive businesses.

By having three businesses, each with different cycles, the idea is there should always be someplace that was attractive.

For example, when cat returns were pressured, Arch leaned into mortgage. When cat rebounded last year, Arch was able to grow quickly because they were running with excess capacity.

This sounds so basic, but nobody (outside Berkshire) really talks this way anymore.

Dinos understood one of the biggest sources of edge in insurance is deploying capital opportunistically and being willing to retreat when you’re not getting paid appropriately for the risk.

That discipline was installed on day one, but it really shined after adding the third leg to the stool.

Greek Food

For those of you who listened to the old Arch earnings calls, you probably remember how I would always align myself last in the queue and then Dinos would joke about how I was keeping him from lunch.

He would then regale all of us listening with the day’s lunch menu. It was always some sort of Greek food. As I recall, moussaka and souvlaki were common.

I will say, for the record, it was never my fault the calls ran so long. Many companies cut their call off after an hour, or maybe a few minutes past.

Arch would graciously hold marathons that routinely went 90 minutes. So it was really the fault of the others asking so many tedious questions that kept Dinos from lunch!

If it were up to me, I would have dropped some of those others out of the queue to get to my more pertinent questions sooner! But I always waited patiently for the end to be the last question before lunch so that Dinos could tell me the menu! It was our ritual.

Though there was that one time when Don Watson and I plotted to override the queue and put me first just to catch Dinos off guard!

But we had a lot of fun doing our amateur stand up routine on those calls, and I like to think he looked forward to it as much as he looked forward to lunch.

On the topic of Greek food, I can’t leave out the annual investor meetings at Dinos’ house.

Dinos had been building his mansion in New York for years. At every investor conference, we would hear about the progress. I specifically recall the special marble imported from Italy, which I believe caused lengthy delays in construction.

When the home was finally ready, Dinos invited all the investors over for an investor meeting. This then became an annual tradition.

That’s right, he webcast Investor Day presentations from his backyard!

I’m not sure another company has ever done that. It definitely surpassed the old “fireside chats” Hank Greenberg used to hold for best Investor Day concept of all time.

But that’s the type of person he was. He was very proud of that house and wanted us all to see it.

But also, unlike most CEOs who view investors warily, if not adversarially, Dinos viewed the investor community as colleagues, and even friends, that he would welcome into his home.

How many of you reading this have ever been invited to the home of your own company’s CEO? Probably very few.

Yet, Dinos invited investors, who he really owed nothing to given how well the stock performed on its merits. He would take us on grand tours because he wanted people to feel welcome. It was truly a remarkable thing.

Anyway, the food. The highlight of those meetings was, of course, the Greek food. It was mostly catered in by a local restaurant he liked, but he would also fly his mom over from Cyprus to make special dishes for us.

Dinos would always talk about the keftedes his mom would make and how much he loved them. He made sure to ask me if I tried them, which of course I did, because I knew, if Dinos told you something was excellent, you could be certain it would be excellent.

I trusted the man’s opinion on many things. Why wouldn’t I trust him that the keftedes would be amazing?

Soccer

I have to briefly mention soccer, as I know it was very important to him. It was always hard with Dinos to know what was reality and what were stories, but he claimed he was an excellent player and I have no reason to doubt that.

I wish there was some old grainy video of him playing in his youth, but, if it exists, I have never seen it, though I do recall seeing a photo once.

I know Dinos was very involved in the soccer scene in New York (he even was inducted into a Hall of Fame!) and his daughters played Division I college soccer.

I even came across a recent news story that he had agreed to build a new stadium for a Cypriot team which combined his love for soccer with his love for his homeland.

Leadership

What made Dinos different from other successful insurance leaders? He was approachable. He never, ever big timed you. He shared credit, even often claiming he deserved none (“you know, I’m not an actuary…”).

Many insurance CEOs are respected or admired, even feared. At many companies, they surround themselves with yes men who tell them what they want to hear.

That was not Arch. Sure, there was a hierarchy, but I don’t get the sense anyone felt they couldn’t challenge Dinos or had to keep their thoughts to themselves.

The leadership at Arch had fun. They were, in many cases, longtime friends. I can’t recall ever having a meeting with Arch without laughter – and lots of it.

Don’t get me wrong. Dinos took work very seriously, but he didn’t take himself too seriously. How many CEOs can you say that about?

He was also a lot smarter than he let on. For all the times he made the self deprecating actuary jokes, very little got by him.

He was not one of those CEOs who delegated everything and hoped it got done right. He was conversant on all the details at every part of the company.

Trust me, I was good at catching CEOs who were good talkers, but weak on the details. I didn’t get stuff past Dinos.

He also was not afraid to surround himself with talented people who might know more than him about some topics. There was definitely not the insecurity you find with some CEOs. The bench strength at Arch was, in many ways, its greatest strength.

On A Personal Note

Out of all the CEOs I dealt with over the years, Dinos was the one who I probably had the best relationship with. There was not just a level of mutual respect, but we enjoyed each other’s company.

I could ask all my hard questions, but also have fun at the same time. We both wanted to see each other succeed.

Even after we both moved on from our old roles, we still kept in touch. We even talked about working together on something before Vantage came to be.

What will I remember most about Dinos? Sure, the earnings calls are a part of it. But really I’ll remember the things he was most proud of – his Greek (Cypriot) roots, the success of Arch, how he shared his home with us.

That and everything I learned about the business from him over the years.

I’m not really sure how to end this, so maybe I’ll try this. I know this has gone longer than the usual time. If I’ve kept any of you from lunch, my apologies, but hopefully the souvlaki hasn’t gone cold yet.