Following Michael Bright's shock resignation, Garth Ramsay gives his first face-to-face interview as executive chairman to Insurance Times….
Q. In the past few months, the share price at Independent Insurance has fallen by more than 60% and the founder and chief executive has resigned suddenly. What is the background to those events, and how are you planning to restore market confidence?
A. I think market confidence is key here. As you say, the share price has performed very poorly, and it is obvious that the stock market has lost a significant degree of confidence. The actions you saw announced last week, which involved Michael stepping down as chief executive, were the company beginning to address this lack of confidence and to try and turn it round.
Q. Does that mean that the market lost confidence in Michael Bright personally?
A. Time will tell whether that's the case or not. The feelings that led up to the events last Thursday were that the actions we took would help to restore confidence in the company.
Q. How would you rate Independent's current trading position?
A. Excellent. Most of the areas in which we are involved are experiencing an upswing, and in the light of that we are seeing more business than we have in the past being offered to us. The volume, terms, rates and conditions are all going our way.
Q. What about the company's underlying financial stability?
A. Nothing has really happened in the last six months to affect that, beyond what has already been published.
Q. Do you think that the reserves are adequate to meet potential liabilities?
A. As you know, we are the only insurance company that publishes an independent actuary's statement every year, from a respected firm of actuaries. We have very publicly reacted to the requirements they had for reserving.
Q. How has the news affected your credit rating?
A. It's worth noting that today AM Best has reaffirmed our A rating and Standard & Poor's has reaffirmed our A rating, albeit with a credit watch continuing on us.
Q. By increasing your reserves, as the actuaries asked you to do, have you not adversely affected your balance sheet?
A. One of the problems of having the independent actuary's report is that when you do get market changes, you have to react immediately and publicly to them.
Q. But that has an immediate effect on profit and loss, and presumably that has triggered the plummeting in the share value?
A. I think it's certainly connected to it.
Q. The French operations have been an admitted embarrassment for Independent. Are you planning to dispose of them?
A. As has already been stated in our results announcement/report and accounts, the French operations have clear objectives going forward. They are under scrutiny at this time, and we'll make a decision concerning them as appropriate.
Q. Does that mean that you are considering some major reconstruction of Independent?
A. We are not considering a major reconstruction of Independent.
Q. Are you considering a sale?
A. We are a public company and if somebody approaches us with proposals we are obliged to talk to them.
Q. What concerns are being expressed to you by brokers, particularly your club brokers?
A. The feedback that we've had from our club brokers has been generally very supportive of the company. Obviously, shock that Mike's not here any longer on a day-to-day basis, but we've had comments like “We like you guys. We have a lot of respect for you. We know you're all still here. We support you”. We really appreciate that.
Q. What message do you have for brokers?
A. It's very simple – not only for our brokers but for our staff and for all the people that deal with us – it's business as usual.
Q. What about the atypical reinsurance arrangements that Independent has had?
A. Are they atypical?
Q. Well, we understand that you decided to pay £39m of your reinsurance premium in cash, with the balance of £66m charged against your real assets. Does that mean that Independent is in theory at risk of losing its buildings, for example your Cheadle offices?
A. Absolutely not. This is a reinsurance premium which, in some circumstances, would have been – could have been – retained by the company that was due it, and used against future recoveries against that policy. Alternatively, it could be paid to the reinsurer. As we stated in the annual report, if we retained the premium we would be paying a 6% interest charge to the reinsurer in respect of its not having cash to use. We did mention at the time of the announcement of the results in our annual report that we hadn't yet finalised exactly whether we would retain it or repay it. In the event, we've decided to do a bit of both.
Q. Will Independent still be trading as an independent company 12 months from now?
A. I sincerely hope so!
Q. What are the chances of an approach and of a takeover?
A. We have had no approaches, but we are a public company. The phone may ring at any minute in any circumstances.
Q. But your shares are now trading close to net asset value. Presumably that makes an approach more likely, because there's less of a premium.
A. Whatever business you're in, if you've got a share that's perceived as expensive you're probably less vulnerable than if you've got a share that's perceived as cheap.
Q. Is there any justification for the market perception that Independent executives have unusually generous expenses allowances?
Q. Was Michael Bright urged to leave by major investors?
A No, there was no pressure from investors.
Q. Do you think that Michael Bright took his eye off the ball because of his work for the Chartered Insurance Institute (CII)?
A. No I don't think so.
Q. Is it possible to combine being president of the CII with active running of a major company?
A Yes, and I think it's necessary that someone who takes on the post of president of the CII is in fact actively involved in the insurance business.
Q. How active is Michael Bright going to be at Independent from now on?
A. Michael has many strengths, and we set it up in the way we did when we announced it last week so that we could use his talents for the benefit of the company, and we shall be seeking to do so in the areas that we agree would be beneficial.
Q. But he will not be involved on a day-to-day basis?
Q. When do you think that you may be able to announce a successor to Michael Bright?
A. This is a process which, to be done properly, will take time. We will inevitably be using the services of one of the major recruitment agencies. It could take months before we are allowed to make any public announcement.
Q. You hadn't started to look before Bright's resignation?
A. It's a different situation. Michael will be 57 this summer, and in the natural course of events the board was addressing the question of succession to him on his retirement in three year's time. But the type of person you're looking for to take over today is not necessarily the type of person you're looking for to take over in a few years' time.
Q. Are you expecting any other senior staff movements, or any significant change in the overall level of staffing?
Q. Michael Bright has obviously been a major industry character. Are you looking for another major personality?
A Michael became a major character because of his success at Independent. I would hope that whoever takes over here as CEO will become one because of the future success of Independent.