In this two-part series we are speaking with an Iroquois member based out of Louisiana. Keith D. Peterson Insurance has been actively insuring wood products in Louisiana since 1939. With a rich family history and a lasting dedication to the wood products sector KDP Insurance has a special place in the insurance industry. In part one we are getting to know the history of KDP as well as why their niche market is wood products. Acting as both an independent insurance agency as well as a wholesaler may not be easy but the family at KDP make it seem that way. For other Iroquois niches look here.
Edwin K. Morris (3s):
Welcome to the Trusted Advisor Podcast brought to you by Iroquois Group. Iroquois is your trusted advisor in all things, insurance. I am Edwin K Morris. So first off I want to start off with a, a, a little contest. I want you to identify this sound and tell me what kind of machine this is. Tell me what type of power saw this is. What’s the name brand of that saw? Is that it? Is it a job? That’s a stihl. That’s a stihl the second part of this is you have to identify what kind of wood this chainsaw is cutting.
Edwin K. Morris (49s):
All right. You ready? A pine tree, b red Oak or c white Oak. Yep. You’re right. Yep. These guys are on it. Well done. I want you to bring that all in there because I’m an old timber guy, myself. What is KDP? And what does that stand for KDP insurance. I’m sure it’s some initials. What, what is it?
Dee Peterson (1m 15s):
Alright so it stands for Keith D Petersen & company, Inc. We’re incorporated it in 1946. Actually, we started in 1939 about more than 80 years ago, but KDP stands for Keith D Petersen and company. And, we find the initials are easy to work with.
Edwin K. Morris (1m 33s):
Well that sounds like a good way to get that started with a KDP folks. And as it family business, then.
Dee Peterson (1m 38s):
Well would you like me to give you a bit of history? Now, my dad came down here from Kansas city in 1939, working with the Atlas mutual insurance company. They came to Shreveport, Louisiana to specialize in selling insurance on Word Products accounts, primarily saw mills in that time, the saw mill business was radically different from what you see now, they were a small, not highly capitalized firms some of them didn’t have the Barker. As some of them were frame a actually a more a frame than steal them. So he started writing fairly low valued mills at high rates for the Atlas mutual insurance company.
Dee Peterson (2m 20s):
And then he went in the Pacific in world war II and came back in 19 around 45 and 46. He incorporated Keith D Peterson in company with his brother Ed who had been in Germany in world war II. And we evolved from that point and what the Atlas mutual insurance company that we purchase the Atlas as book a business around 1982 and decided that we could have a better future as MGAs, rather than as producing solely for the Atlas mutual. And we evolved from that point where we are today,
Edwin K. Morris (2m 59s):
Have you scaled and diversified to do more than just saw mills?
Dee Peterson (3m 2s):
One of the things that we did early on my Uncle Ed worked primarily outside the lumber arena. My dad focused on lumber account, he and Ed owned Keith D Peterson, a company together, a dads, a area of expertise, which is primarily in a lumber and Ed’s was in general insurance. We can continue to write, all lines of insurance, main street business, and along with wood products. And we made a decision, my brother and I, who now owns the company, made a decision in the late seventies to diversify, even further and rather than focus on lumber business, really try to expand the non-lumber side.
Dee Peterson (3m 45s):
So when we found ourselves in the midst of a recession or depression in the lumber sector, then we wouldn’t be hindered solely too the lumber industry. And it’s worked out real well for us. I work primarily on the lumber side. My brother works on the general insurance side and it Connor works with me on the lumber side.
Edwin K. Morris (4m 4s):
Let’s fill everybody in here and what we’re talking about with a lumber side versus not, so lumber in processing in anything from the raw product to a finished product or a semi-finished product, meaning you’ve got kilns, you’re drying lumber, you’re planing lumber, you’re shaping lumber. What you’re talking about is soup to nuts, you were talking logging forestry management all the way through the lumber process, too, a finished or a semi-finished.
Dee Peterson (4m 30s):
So not so much as far as forestry management and not so much standing timber from a logging on through the finished product. That’s what we write. A, you mentioned, you mentioned the dry kills concentration yard saw mills printer, mills, paddle manufacturers, furniture manufacturers, as long as it has lumber than we can entertain the coverage, or you can take a hard look at it and see if it fits our niche. And if we want to provide the coverage.
Edwin K. Morris (4m 55s):
Got it. Okay. So how did you expand that business did it come pretty organically or did you have to really knock on some doors?
Dee Peterson (5m 4s):
We had to really knock on some doors and I would tell you that if you looked at our history, one of our weaknesses up until a few years ago was in the marketing side. You had real good luck by word of mouth. We knocked on a lot of doors and a lot of people liked what we did. They would encourage other people to contact us. And we grew primarily organically and we utilized word of mouth references. One of the things that Connor did when Conner came on board with a focus on marketing, and he got an MBA at a, the Moore School of business in the university of South Carolina and a specialized in marketing at that. So he’s really helped us in that regard. So we’re trying to not solely rely on word of mouth.
Dee Peterson (5m 45s):
It really that our product out there so that people can be more inclined to call us just to show us what we can do for them.
Edwin K. Morris (5m 51s):
So go back to your comment about when you said it, I heard you’re kind of future-proofing yourself by this, the diversification, because lumber is a fickle fickle thing. When it’s hot, it’s hot. And when it’s not, it’s not the people that get in to the business when it’s hot, they’re, they’re are rushing out the doors. They’re like, everybody’s got a saw mill now. And then it’s like, when it turns sour, everything’s for sale, everything is closed. And there’s a few production places that are still plugging away. It that’s got to be an unpredictable business’ for you.
Dee Peterson (6m 27s):
It is very much so. And you can say that about furniture manufacturing and you go in to the Tupelo Mississippi area. And when the furniture market is good, you see a lot of small furniture plants starting up. And then when it’s bad, they’re shutting down. And a, if you’ll see a lot of all school houses converted to furniture, plants are furniture mills, and a, and then when the, when the market turns, all of a sudden, they go out of business, you see that more on the furniture side than you do on the sawmill side. But one of the things that distinguishes saw mills is the fact there is a lot of blood, sweat, toil, or a lot of heart, in the saw mill industry and the saw millers as a whole, will try to weather those downtimes out a little bit better than some of the other manufacturers focusing on the need for wood.
Dee Peterson (7m 17s):
But that in fact, not withstanding is very cyclical. And you know, when you, when you look in the amount of hardwoods board feed, cut it in 2008 versus 2012, I think there was about 12 million board feet cut in 2008. My years may be a little bit off on this, maybe 2005. And then by the time 2012 rolled around, it was down to five. So the lumber industry we just got killed. And one of the good things right now is the fact that prices have been way up that market’s real good. Although prices, they’re starting to turn it down just a little bit, but a lot of guys oi the lumber. So I would tell you that, that this may be the best year they’ve ever seen.
Edwin K. Morris (7m 54s):
Was there anyone that was like a sawmill lumber, anybody from that vain in your family that brought this passion, or did you guys just assimilate where the biggest opportunity was just because of location?
Dee Peterson (8m 12s):
It’s a bit of both my father starting with my father. We’ve always had a passion, some reason they can’t tell you why its not in our blood, but we we’ve had a passion from the lumber industry. We liked it. We’d like to let the whine and whine in that band saw when the pine log is on the carriage, we run into the saw. And and you can, you can look at a log, going through a circle is Saw or a bandsaw is being cut. The board’s in its almost therapeutic seeing that saw cut it to the wood and forming in the boards and it goes around the edger and comes back through the frame. So, and it ends up as a finished product and you can sit there and look at that for an hour and a saw mill. It just kind of comforting in a way I, I saw my first saw mill.
Dee Peterson (8m 52s):
when I was six years old and I traveled with my father, when you looked at all, these saw mills, many of which were small Groundhog mills. And then as the industry involved in a bigger and more, a highly capitalized and finer mills and just kind of grew to like the sound and the smell and the feel of it. And I found it very, very interesting. And I like the people in the business. They were a very down to earth, solid people and enjoyed working with them on the vast majority of cases, they told you they do something and that that’s what they did. And I like that part of it very much.
Edwin K. Morris (9m 28s):
My next question is it was where did you find the sweet spot for you and what you’re passionate about, what your, your father was passionate about? Where did you find that sweet spot? What’s the biggest than what’s the smallest for you guys?
Dee Peterson (9m 44s):
That’s a, can be a difficult question to answer, but cause the answer I give you a now what would be different from what it was say 20 years ago, I’ve been in this role for 40 years, Connor’s been in it about five. And so in another five years, he’d probably give you a different answer as well. But right now I would say that we would entertain looking at just about anything with a market, the way it is a placement on a real high value of mill, many of which is more difficult because of reinsurance considerations then was the case say a four or five years ago. A mill with the values up the $10 million. is a lot easier to a place than a mil in excess, a $10 million because that need for re-insurance is less.
Dee Peterson (10m 28s):
As far as a sweet spot is concerned, I would tell you that it probably anywhere ranging from a minimum of a, a two or $3 million. And then in terms of sweet spot, up to 20 million, I want to face him to say that we write a lot of mills over a $20 million and we have a real good luck writing is just that the placements on the lower value mills right now is easier. I don’t want anybody to be dissuaded from saying whether the sweet spot is a 20 million on under ’cause. We have a lot of very big insureds on the books and we don’t want anyone to feel that we’re not interested in writing those in a competitive basis.
Edwin K. Morris (11m 9s):
I have to say that as a old timber guy, myself and my dad’s favorite saying is that once you have sawdust in your hair, you can’t get it out. And that is one thing that I’ve seen that most family run businesses or a family businesses is something that’s a, it’s a, it’s not just prideful its in their DNA to a degree. Yeah. It really becomes not just a career choice, but a lifestyle.
Dee Peterson (11m 40s):
With the evolution at the industry, you’re seeing a lot of those smaller mills sell out to bigger mills and you don’t see as many family-owned mills as used to be the case, which frankly I hate to see, but that’s just the evolution of the business.
Edwin K. Morris (11m 54s):
How did you choose who got the run which section of the wood product lines, as far as your own agency, was there any kind of personal interest that drew somebody to a certain type of client?
Dee Peterson (12m 8s):
You know, no one’s ever asked me that question before I’ve been in for a long time, I’m going to attempt to answer it as briefly as I can. My brother. And I both went to Georgia tech I’m I’m older than my brother, but I went in the Marine Corps for three and a half years. So my brother started here about two years before I did. And when he started, there was more of a need for someone on the general insurance side. And so that’s what he started in. And then when I came on board, about two years later, there was a more of a need for someone on the wood products side. And that’s what I happened to start doing. And so I worked for the fidelity underwriting agency, which was in the underwriting authority, For the Atlas Mutual insurance company and four Keith D Peterson and company I specialized in wood products, my brother who specialize in a general insurance that each of us did get involved with the other area of insurance.
Edwin K. Morris (13m 1s):
To wrap things up what would be your best advice for anyone thinking about starting a sawmill?
Dee Peterson (13m 7s):
I would say just have your eyes open and realize is very much a commodity that is very cyclical. You may be tempted by the high price is right now and feel that you’re going to make you a fortune quickly. And then all of a sudden when the market downturn and you find that, that it didn’t turn out the way you wanted it to, I would say not be too highly leveraged, try to have enough capital behind you so that so that you can, weather the bad times, because there will be bad times, a, a good saw miller always has his eyes open for good equipment on the market, either through auctions or other means and ends up getting a lot better deals on a carriage say than good used carriage than would be a case if he bought one new that I think that’s a real common place with anyone making a go of it the saw mill business.
Edwin K. Morris (13m 57s):
And starting out on small potatoes is as far as buying used equipment is definitely your safest route to go.
Dee Peterson (14m 2s):
And I think Connor wanted to add something to that.
Connor Peterson (14m 4s):
One thing I want to I’m going to pipe in here for just the second. Considering what has happened in the past 10 years. I don’t think that would be very hard for somebody to get into this just because of the fact that there have been a lot of smaller mills that have shut down in. So, you know, it’s possible that somebody has been sitting on a piece of property that has a full saw mill already built on it and there just waiting for a buyer. So a lot of their work has probably already been done for them.
Edwin K. Morris (14m 29s):
Well thank you gentlemen, for your time today. It’s always fun talking about wood and wood processing. I appreciate your time.
Dee Peterson (14m 34s):
Oh, well, I’ll tell you it’s what we do. We enjoy doing it. And you’ve asked some questions that a spurred my thinking process that I hadn’t been asked them before and I enjoyed the conversation. Thank you.
Edwin K. Morris (14m 45s):
Thanks for listening to this edition of the Trusted Advisor podcast brought to you by Iroquois Group. Iroquois is your Trusted advisor for all things insurance in. Remember get out of the office in cell. I am Edwin K Morris, and I invite you to join me for the next edition of the Trusted Advisor podcast.