Chief executive threatens to disclose insurer expense ratios if commission disclosure is forced.
See analysis: Backstage at the forum
Towergate chief executive Andy Homer has mapped out the future of the business, insisting it has a number of successors ready to take over from him and chairman Peter Cullum within three years.
Homer was in conversation with Barry Smith, chief executive of Fortis Insurance, at the Insurance Times commercial lines forum in London on Monday. In front of an audience of industry leaders, Homer answered questions on the issues facing the market as it struggles to come to terms with the crisis in the world economy, as well as on the business model and sustainability of Towergate.
Homer said he and Cullum had “serious plans” for the succession of the business following their exits. “What we are trying to build is an edifice that outlasts me and Peter [Cullum] because we are beginning to crumble. But the people we have got, Clive [Nathan], Amanda [Blanc], Grant Ellis and the Open GI team are a bunch of young guys.
“The talent we have will keep this organisation going, providing we can make sure we can get through the next couple of years and that the succession happens smoothly.”
Homer said the succession plan could happen soon if the business completed an initial public offering in the next two to three years. He ruled himself out of leading the business if it was listed on the London Stock Exchange.
“If you go to IPO you have to think about the team that can convince the City,” he said. “I’ve been a director of a plc, I’ve been a director on the board of a FTSE 100 company, I don’t want to go back there. It’s a particular experience and that’s for other youngsters to take on board, so we are preparing the way.
“Peter is 60 in two years’ time, he will be the single major investor pre-IPO in Towergate, but like me he does not want to have the cut and thrust of every day trading for more than the next two or three years.”
Homer added: “We have got serious plans to make sure when we hand over you almost don’t notice that we have faded away. I expect that Peter and I will be the non-exec directors and major shareholders of Towergate for the next five or six years. If an IPO comes along and changes that shareholder dynamic, then you know that’s what will happen. But absent an IPO and we will carry on working behind the scenes as non-executives. We do need the new breed of people who have got equity stakes to take Towergate on to its next curve.”
On commission transparency, which the FSA is considering, Homer said the business would not “have a problem explaining our income”. But in a threat that is bound to worry insurers, he said the broker would insist on disclosing its expense ratios to clients as well.
“We think it is wholly sensible that if we are exposing the broker’s expense ratio, we should expose the insurance companies, who have got expense ratios that vary on commercial lines from 10 points to 23 points,” he said. “So I think of sharing with our customers, do you want to go with a 10% expense ratio or a 23% ratio? I am quite happy to do that.”
In another blast at insurers, Homer said they suffered from a “discontinuity of leadership” and urged them to make their future strategies clear. I would say to the insurance company CEOs, can we have a clear announcement of your strategy so we understand where we fit in your distribution strategies?”