Cooper Gay chief Toby Esser explains his growth plans for the company, his thoughts on Lloyd’s and Bermuda, and why he is in it for the long haul.
In a couple of hours, Cooper Gay chief Toby Esser is leaving for Hong Kong. The son of a Fleet Street man, he is both colourful and succinct, describing the place as “Shanghai minus the steroids”.
Brevity is a good characteristic for a man who spends around 40% of his time on the road visiting the broker’s 30 offices, which include Kazakhstan and Columbia – the location of his most memorable insurance experience.
In 1989, when he was running the broker’s New York office, he went to visit a Columbian mining company.
“I almost got kidnapped,” he says, enthusiastically. “It was the only time I went to see an actual risk.”
On the road to Bogota, Esser and his colleagues were held up at gun point. Someone demanded to see identification.
Esser recalls: “For some reason I decided showing them my English passport would be a bad idea, so I showed them my New York Health and Racquet Club membership instead. Luckily my name wasn’t on the list.”
How things have changed. With his phone bleeping three times and ringing once during our brief conversation, he is clearly a wanted man.
Given developments in the London market of late, it’s not so surprising. In the spring the company he has run for the past seven years began talks with rival Heath Lambert over the purchase of its reinsurance, aviation and UK wholesale operations.
And while he isn’t familiar with changing employers (he’s a Cooper Gay lifer since the age of 17, though he says he “paid them for the first couple of years”) he is relaxed about the 70 employees who subsequently transferred, and a number of others who left Heath to join another rival, AJ Gallagher.
“The integration has been easy,” he says. “We knew the people pretty well. The challenge is to build the UK wholesale business, FSJ.”
Having described FSJ as a “little bit of a managing general agent,” he adds that the company is well on the way to developing further MGA operations in the US, Europe and the UK, where he says a number of informal strategic alliances have been created.
He is resoundingly sceptical on the prospect of poaching staff as opposed to buying a business outright.
“Companies – and their lawyers – are much better at making sure contracts are enforceable.
“We used to have a rule: when someone comes in they might bring half the business with them. That’s not true any more. When you hire individuals they have non-compete clauses. But you have to start paying them, which is a negative cash EBIDTA (Earnings Before Interest, Taxes, Depreciation and Amortisation) impact. Positive EBIDTA is important to us.”
It’s quite an understatement. Last year the company posted record growth in EBIDTA of 32% to £15.8m. Since taking the helm of the company, total revenues have grown from £29m to almost £70m; enough to attract the attention of Portuguese corporation, Sonae, which bought a 14% stake in the business last year. This will double by the end of next year.
“If you are looking to maintain growth and not sell out, that is what you have to do [pursue a listing]. We want to grow our brand. We want real value in the stock because
we want to buy other companies.
Esser, however, is determined to keep the business independent. His next play will likely be to pursue a listing once it reaches sufficient scale of around £25m in earnings.
“If you are looking to maintain growth and not sell out, that’s what you have to do,” he says. “We want to grow our brand. We want real value in the stock because we want to buy other companies.”
As evidenced by the recent appointment of a head of internal audit, he adds: “We are already running ourselves as though we were public. We don’t see a transition, but we see the benefits.”
Esser describes “getting the company in the hands of people who should own it” as his greatest achievement. Cooper Gay has over 80 employee shareholders.
But before any talk of a listing, there is some serious shopping to be done. Esser says that the company is in advanced discussions with two brokers, one of whom is in the London market – a topic about which he is nostalgic.
“The fringe that created the London market is down to a handful of companies,” he says. But one thing that has not changed is that it remains predicated on a strong Lloyd’s, as evidenced by the recent appetite for investment.
“It doesn’t surprise me,” he says. “A Bermudan getting into Lloyd’s gives them a platform for global access, as well as reputation, a rating and access to niche areas.
“If you look at Tokio and Kiln – the knowledge they bought is incredible.”
He is not overly concerned about insurers’ moves to redomicile.
“There’s been an enormous trend. It’s a straight choice for insurers: generally, they can underwrite business anywhere. For the broking community it’s a different issue. But Lloyd’s is still writing more gross business.”
He is also typically frank in his assessment of plans to open up Lloyd’s directly to regional brokers.
“I can’t see how that’s going to provide competition unless Lloyd’s itself wants to take on a massive costs base.
“I think they want to figure out a way to get more business from those brokers who don’t give it to them right now – that’s the big three.”
Whatever Lloyd’s has planned, one thing is for sure: Cooper Gay and Esser will remain in the thick of it.
“When I was 19 I told people I wanted to run the company,” he says. “They laughed. The genes in the family suggest I like work. Hank Greenberg is 83 – but that could be pushing it.”