With a truly engaged management team at the helm, Hastings has posted a solid rise in profit. Should the likes of Bollington and Lark emulate its strategy?
Hastings’ turnaround is a remarkable tale. Once considered the basket case of IAG’s UK business, it is now posting a £26m profit for 2011 – up 63% year-on-year. Its combined operating ratio is looking solid at 96%, and there is even talk of a flotation at an unspecified future date.
Cynics might roll their eyes at this latter ambition – after all, which broker isn’t planning to float these days? – but there’s no arguing with Hastings’ numbers. Whether or not it reaches the stock market, it has put its shaky past far behind it.
So what’s the secret of its success? The broker has put significant investment into fighting fraud, which has helped clean up its book and get it back on the right side of its insurer partners. It is leading the pack in this crucial area. It also has a strong brand and marketing strategy, vital for a personal lines broker.
But there’s a much more fundamental reason why Hastings has recovered so successfully. When IAG was on the verge of closing down the business in 2008, IAG UK chief executive Neil Utley and several private investors and members of the senior team stepped in to perform an MBO, completed in early 2009.
This gave the business a second chance and, crucially, tied its people into its future. Under Utley as chair and Ed Fitzmaurice as chief executive, the business has a winning combination of experience, business acumen and personal conviction.
It’s an interesting lesson for other businesses – and those interested in buying Groupama’s broking arm would do well to take note. Bollington and Lark are both looking to perform their own MBOs. If they are outbid by a rival broker such as Giles, thought to be running the rule over them, how will the managers feel?
With the best will in the world, they will be disenchanted – and that does not make for a successful business.