For every legendary pugilist, there’s a string of would-be challengers who never reach boxing greatness. In many cases, these palookas lack the strategem or killer instinct that separates mediocrity from greatness. Then there are the proud warriors who lose their edge. But, through grit, talent, and fortitude, some are able to lift themselves off the canvas to regain their former glory.
The same holds true for BE 100S CEOs. Competitive pressure from mainstream companies, improper planning, and external events socked them with a flurry of blows that knocked their firms down the rankings and, in some cases, out cold.
Such is the case for black insurers. Competition from general-market insurers have weakened these beleaguered insurance companies. There are only four major black insurers; as recently as 2003, there were 10. One of the heavyweights to fall from grace, Booker T. Washington Insurance Co., went into voluntary receivership in February after the Alabama Department of Insurance found the company could not pay $4.3 million of its obligations.
“Black-owned financial services companies will continue to face competitive pressures from mainline firms who are increasingly going after their customers to boost market share in that area,” says Buddy Howard, banking analyst and president of Equity Research Services Inc. in Raleigh, North Carolina.
One of the events that delivered a knockout punch to black businesses across the country was Hurricane Katrina. The storm wrought hundreds of billions in damage and forever changed the face of New Orleans, one of America’s predominantly black cities. Perhaps no BE 100S firm was more devastated by Katrina than New Orleans-based Liberty Bank & Trust Co. (No. 7 on the BE BANKS list with $293.2 million in assets). The storm flooded its headquarters and damaged tens of thousands of dollars worth of equipment, forcing the bank to move its headquarters to Baton Rouge.
CEO Alden McDonald Jr. says Katrina-related expenses and losses increased the bank’s overall expenditures in 2005 by about $6 million. The bank had a loss last year of $3.2 million versus profits of $2.8 million in 2004. Assets fell to $308 million from $350 million. The bank put aside $2.5 million to cover future loans related to Katrina. Of Liberty’s eight New Orleans branches, McDonald says five remain closed. If the disaster had not occurred, McDonald maintains, Liberty would have repeated its $2.8 million earnings performance in 2005. “The amazing part of the story is the bank was able to take the $6 million hit, remain profitable throughout this entire ordeal, and is very solvent,” says McDonald, who plans to move its headquarters back to The Big Easy by the end of the year and rebuild the five branches as the city repopulates.
Not all blows to black business came by way of natural disaster. Caught between weight classes is perhaps the best way to describe Horace F. Jones’ plight. His Advanced Resource Technologies Inc. was hammered, losing 40% of revenues when a contract with various government agencies ended. The company, which ranked 75 on the 2005 BE INDUSTRIAL/SERVICE 100 list,