Even before Andrew Fisher took on the job of Cox chief executive, he was defending the Highway takeover debacle and later the Lloyd's ring-fencing arrangement But he tells Elliot Lane that acquisition is the real story.
When asked for a summation of Cox chief executive Andrew Fisher's character, a senior director at a Lloyd's managing agent said: "He looks like a banker. He sounds like a banker. But he acts like a businessman."
As compliments go, this one was a back-handed one with top spin. This old hand in the Lloyd's market remembered crossing swords with Fisher when he worked at Coutts bank, overseeing the bank accounts of high-profile Lloyd's Names.
However, a recent analyst's report from investment house Numis, which was critical of the insurer's future earnings potential and urged shareholder's to sell, added this assumption, that "Andrew Fisher appears to be addressing Cox's challenges".
Fisher is another self-deprecating banker (similar to the perception Marsh chief executive Bruce Carnegie-Brown would like us to believe) who regards himself as an interloper in the insurance market, just finding his way.
"I have only been in the job three weeks so I know little," he says.
However Fisher has been a non-executive at Benfield Group for 18 months now and says that exposure to the reinsurance broker's work and the various projects it is involved in led him to believe "that there is an industry here that could be more efficient".
"This is a market where you have opportunities as a consolidator or to pursue consolidation. We have one of the best combined ratios in the industry, there is investment for acquisition, and the right management team in place. These are three nice places to start from when taking this company forward," he said.
Previous incumbent Neil Utley was unceremoniously ousted in June and the whole affair was exposed in a Sunday Times column. Fisher says he was approached way before then, in February, by headhunters who asked him whether he knew of anyone.
"They said it was chief executive of an insurance company with substantial opportunity for growth, one that had been through some difficulties in 2001, and one that wanted to growth substantially with someone who not only had M&A skills, but also integration skills.
"They said would I know of someone who might be interested. And I said: 'I might be'."
He then met the board and Cox chairman Peter Owen several times. "I saw it was a company with growth potential, but greatly undervalued. It was undervalued then and in my mind it is still undervalued."
But back to the newspaper column. It started a vicious rumour that Cox's failed acquisition of motor insurer Highway had been initiated by the latter. It said actuary EMB, highly respected in the motor insurance sector, had carried out an audit of Cox and highlighted concerns about its reserves and potential future claims, in particular in regard to car-crash injuries.
A figure of £70m higher than an estimate by Deloitte was bandied around.
Fisher is clearly frustrated and exasperated by the whole affair.
"I have read everything and it is laughable at what has been purported. If you look at the potential hole of the exposure, against the amount of premium we write, against the type of book we have - short tail - and that we have been a profitable company of 30 years, then you have to question the intelligence of someone who could say, yes this could be a possibility.
"If you quote a very professional body, then you must check whether that body has produced a full report and tabled that full report. In this case we know it didn't. It was a pure scuttling technique, but has had serious implications for our shareprice. I had to spend days talking to 30-40 major institutions in horrible detail and explaining how we are absolutely fine. This is not much fun a week before you join a company.
"I don't have any bad feelings towards EMB because it did not conduct a review of our business. It looked at a piece of data based on a transaction which we readily supplied and I think it drew some initial conclusions at the negotiation point. Which is fair enough, but it is a long way off saying publicly we have problems with our reserves.
"It is a professional and very good firm but then so is Bacon & Woodrow and, as our actuary, was exposed to all our bits and pieces in the report. It signed off three days after all this thing blew up and said 'no guys, everything is fine'."
He also doesn't believe Cox will be answering questions on the EMB/Highway saga in two or three years down the line. Unlike the questions that still surround the Lloyd's ring-fencing deal. Fisher's mission at Cox is of course to improve the share price but also to educate investors, he says.
"The share price is cheap. Much cheaper than it was a few months ago. But why it is cheap is a short term anomaly. It will come back as it is so undervalued.
"If you get hung up on the daily movement of the share price, you go nuts. So we must make the strategy sound and explain to people what we do. I have spoken to our institutionalised investors who are worried we are exposed to Lloyd's.
"But we have to explain we are a motor insurer which accounts for a little over 50% of Lloyd's motor account. And that motor market is about 7% of Lloyd's overall business. We are not representative of the Lloyd's volatility - what we represent is long term good returns."
But he has resigned himself to the fact that, even if the lawyers, accountants, Lloyd's franchise board and the FSA appreciate the airtight nature of the ring-fencing, until the Lloyd's issue goes away many investors and market players "will not understand or accept it until it has gone away".
"This is why we have a share price that is there today. Education is one of the ways we can try and get beyond it."
What has changed is that the major investors in Cox, such as Warburg Pincus (23.3%) and Palamon (5.6%), are willing to put their hands back in the their pockets and invest.
Broker deals
Fisher is ready to buy and has between £100m and £200m to spend on an insurer "of similar size and business model as Cox". A number of deals with personal brokers are in the pipeline, he said, and he is interested in buying a large broking network.
"I want to get more clarity in the business. We have outstanding underwriting capabilities and a small broking capability. And though they work together at the moment, there is more scope. For the past 18 months the programme has been moving forward internally. More needs to done, which may lead to centralisation."
There had been rumours that Cox was in discussion with Michael Wade's Capital Insurance operation, backed by Warren Buffett, which failed to get off the ground two weeks ago. Fisher said he could not comment on Euclidian or any talk of merger or acquisitions in Lloyd's.
However speaking a week before the announcement that Wade's initial public offering was not going ahead, Fisher gave this assessment.
More clout
"Wade's idea is good and the market needs a significant player who is willing to become the consolidator, bringing relatively small players into one, to get more clout. Good. Doing it by swapping your paper for someone else's paper then bringing them together by realising synergies is not a strategy I would follow. It almost beggars belief that anyone would think it could work.
"My appointment was on the way. It was peripheral (talks with Wade) but interesting to see how it panned out. When the transaction went away and we said we didn't want to do it the whole series of articles came out."
So Cox was involved with Wade. And Cox and Lloyd's will remain synonymous for some time yet.
