Only a year ago, ULLICO Inc. was mired in scandal and losses. But the union-owned insurance and investment company has managed to turn things around under the leadership of Chairman Terence M. O’Sullivan and has reported its first quarterly profit in three years.

The company provides competitively priced insurance and financial services for multi-employer trust funds, labor unions and the rank-and-file. But ULLICO’s litany of troubles included a controversial corporate stock program for insiders that landed ULLICO under a congressional and legal microscope. Further scrutiny revealed shrinking assets, losses on core insurance lines and enormous company expenses.

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A leading insurance rating agency twice downgraded ULLICO, and the Maryland state insurance commission threatened to place the company in receivership. The firm even lost its largest health insurance customer, which generated annual premiums of $25 million.

But in the year since ULLICO board members ousted former building trades’ union leader Robert A. Georgine as chairman, president and CEO along with many of the old-guard board members, ULLICO has made what one observer describes as "monumental progress." For the first quarter of 2004, pretax net income was $477,260 compared to a loss of $3.7 million for the same period in 2003. Revenue was down to $128.8 million in the first quarter of 2004 from $151.9 million a year ago. "ULLICO is now stabilized and the large losses of the past are behind us," O’Sullivan told shareholders at the May 20 annual meeting. He also is general president of the laborers’ union.

Since his election on May 13, 2003, O’Sullivan has brought in professionals to oversee the day-to-day operations and manage the insurance businesses. He slashed about 100 staff positions and more than $41 million in annual expenses.

Other difficult decisions included selling the showplace headquarters that the previous leadership had just built. ULLICO sold the building for $157.5 million, earning $16.8 million before taxes. It now rents space there. Some unprofitable in-surance lines have been sold off and outsiders are underwriting some others.

Despite all the good news, challenges remain. "We have to continually rethink our business strategy," says O’Sullivan. It is important to meet customers’ needs as costs increase but still be competitive and profitable, says O’Sullivan. Lawsuits related to compensation and retirement benefits of past leaders are still pending.

Carl Austin, an analyst at A.M. Best Co., the Oldwick, N.J.-based insurance rating firm, says his staff is reviewing ULLICO’s rating and will soon decide whether to upgrade it.