The BMS chief executive discusses taking on the big guys – and beating them at their own game
BMS chief executive Carl Beardmore is clearly not one for putting his feet up. “I’m not the best person to talk to about holiday entitlement - I simply don’t take them,” he says, only half-joking.
He has set himself and the London-based wholesale insurance and reinsurance brokerage he runs a huge task: beating the big hitters at their own game. He wants BMS to occupy the space vacated by mid-tier companies such as reinsurance broker Benfield when they were bought by their larger peers.
“Our vision now is very much to present ourselves as the alternative to the larger players,” Beardmore says. “Speaking to clients and markets, there seems to be a great desire to see somebody fill the slot behind the big guys.”
Big enough to compete
To say Beardmore has his work cut out is an understatement. By way of illustration, BMS turned over £50.2m in 2010, its 30th year of operation and the most recent year for which figures are available. In the same year, Aon’s risk solutions division pulled in $6.4bn (£4bn), and Marsh & McLennan Companies’ risk and insurance services division reported revenues of $5.8bn.
While Beardmore is clearly not trying to match his biggest rivals’ turnover, he knows BMS needs to be bigger if it is to mount a genuine challenge to the largest brokers. He contends that a broker needs to be pulling in revenue of between £200m and £250m before it can be considered a genuine alternative.
The big players will look at clients that have $1m-$2m of brokerage to present and question whether it is viable for them to invest the time and effort to sustain or win that business. We can justify the time and effort on that account and we still value that kind of business highly.”
The company is on track to surpass £100m of revenue by 2016, says Beardmore. He expects the company’s 2011 revenues to be up 10% on 2010 levels, and further revenue growth of between 20% and 25% in 2012. This growth level compares favourably with the companies Beardmore is taking on. Aon and MMC’s (re)insurance broking divisions, for example, grew revenues by 6.1% and 9.3%, respectively, in 2011.
Taking the big brokers’ scraps
Beardmore believes the time is ripe for the mid-tier brokers to rise up and take business from the larger firms. The bigger a broker, the bigger the contract it needs to win to make the effort worthwhile. Beardmore contends that larger brokers are struggling because these big ticket deals are few and far between, while smaller firms are finding rich pickings and growth opportunities in the scraps from the larger firms’ tables.
“The big players will look at clients that have $1m-$2m of brokerage to present and question whether it is viable for them to invest the time and effort to sustain or win that kind of business. Whereas we can justify the time and effort on that account and we still value that kind of business highly,” Beardmore says. “The opportunity at the moment sits with the mid-tier brokers. The bigger challenges sit with the large brokers as they try to keep their sausage machines full.”
This is more than just talk. In the USA, BMS is targeting members of the Ward 50 - an influential ranking of US property/casualty insurers produced by benchmarking firm Ward Group, which, interestingly, is owned by Aon.
BMS has managed to lure three Ward 50 accounts from the big brokers over the past six months and is expecting to tempt over at least another two in 2012. “Those for me are real examples revealing the potential we have to compete at the highest level,” Beardmore says.
Expanding near and far
In addition to the USA, where BMS is focusing most of its attention, and where Beardmore will now be spending most of his time following the opening of the new New York City office in January, growth is coming from several places.
The four main pillars of the business are reinsurance, wholesale insurance, speciality business and underwriting. BMS is also expanding its London-based wholesale operation. “We are a strong supporter of the Lloyd’s market and a key part of our strategy going forward is to bring increasing amounts of new business into the Lloyd’s market,” Beardmore says.
A further part of the BMS growth plan in the London market is expanding into underwriting. BMS made headlines last year by launching a new managing general agency, Pioneer, after Lloyd’s refused the broker’s application for a licence to set up a syndicate.
I know there are regular rumours that BMS is simply polishing itself up ready for a sale. That couldn’t be further from the truth.”
Pioneer has £62m in underwriting capacity from Liberty and a target to write £27.5m of premium in its first year. Beardmore says the MGA is on track to hit its 12-month underwriting goal and will be close to filling the full £62m facility over the next 12 to 18 months. BMS has not abandoned its plans to set up in Lloyd’s.
“We still have one eye to moving our MGA play into a syndicate play at some point,” Beardmore says.
BMS’s push into underwriting is in keeping with the actions of its peer group. Cooper Gay has Globe Underwriting (recently rebranded from Oliva), Hyperion has DUAL and RK Harrison has Aqueduct. Beardmore says brokers’ underwriting efforts are being driven by the fact that the broking business model is in transition.
“Brutally speaking, it is because overall volumes of business are not increasing, and so if you want to grow your business, you also have to look at the quantity or the extent of the distribution chain you own,” he says.
Mergers and acquisitions
Of course, if Beardmore is to hit his target of revenues between £200m and £250m, he will need to make acquisitions. He expects this will happen in the next two to three years.
But, given the number of unsuccessful mergers in the broking and insurance sectors, he will proceed with caution. “I would like to make sure we do it at a time that’s right for us and we’re properly prepared and resourced to manage a merger or acquisition,” he says. “Two out of every three never add the value that was intended.”
He is adamant that the only part BMS will play in the M&A game is that of buyer. “I know there are regular rumours that BMS is simply polishing itself up ready for a sale. That couldn’t be further from the truth,” he says.
Beardmore can expect to stay pretty busy. While taking few holidays, he does allow himself regular visits to the gym. He would be wise to keep this up, as if he keeps taking business from bigger brokers, he could have a fight on his hands.