The nosedive of the mortgage market and PPI’s public image problem has meant a tough year at Towergate’s Paymentshield. We talk to one of the group’s top-three heirs apparent about rehabilitation and his persistent hankering for deal-making

Tim Johnson looks?exhausted as he emerges through the revolving doors of Towergate’s London headquarters, lugging heavy bags. He has been travelling since the crack of dawn from his home in Southport and his train has been delayed. Despite his fraught journey, he is unfailingly polite, immediately offering a firm handshake followed by coffee. But you can’t help feeling that the last thing he wants at this moment is to be probed on the highs and lows of running Towergate’s mortgage insurance company, Paymentshield.

If it has been a tough morning, it has been an even tougher year. Along with deputy chief executive Amanda Blanc and underwriting head Clive Nathan, 42-year-old Johnson is widely recognised as being part of the trinity of heirs apparent to founder Peter Cullum and group chief executive Andy Homer. After a spell at Aon, he joined Towergate as chief executive in 2003, going on to lead newly created sister company Cullum Capital Ventures in 2005, following Towergate’s merger with Folgate. The results were impressive: in just three years, CCV had doubled its gross written premium to more than £200m.

But in 2009, Johnson faced his toughest gig yet when Cullum made him head of Towergate’s other sister company, Paymentshield, following the mortgage market’s 50% nosedive since the heady days of 2007.

Dawn after PPI’s darkest hour

So what’s the verdict on the past year? “Let’s start with the lows”, he says, slightly wearily. Unsurprisingly, he goes on to recognise the culling of staff as the year’s nadir. Out of Paymentshield’s 300 staff, one in five jobs had to be cut. “2007 was the real peak of the mortgage market,” he explains.

“In that year, the UK’s domestic mortgage lending peaked at about £350bn and we all know how that totally overheated. That meant the business’s cost base was aligned to £350bn, whereas this year that figure is more likely to be £140bn. That meant we had too many staff. When I first got here, we spent the first couple of months getting the cost base down. And as it turned out, that meant losing people.”

Towergate bought Paymentshield for approximately £180m in 2006. In hindsight, does Johnson think that Towergate overpaid for the company? His answer comes swiftly and firmly. “No, it was one of the best acquisitions we had ever done and the return on capital has been fantastic – I can’t give you the percentage but it was extremely healthy.”

He doesn’t hold back, however, on his feelings about those responsible for the mis-selling of payment protection insurance products. He concedes that the public image of PPI has been dealt a blow. “Our product was mortgage PPI rather than loan-based PPI, so it was never sold the way the banks sold it. But you’re right, I don’t think the public distinguishes between the way different products were sold,” he says.

“The shame of it is that this is a product people need. People cancelled it when they needed it most because it has a bad odour around it. It has been mis-sold in a certain sub-sector of a certain market. It wasn’t every vendor and it wasn’t every product, but the odour lingers.”

Paymentshield is making inroads toward the rehabilitation of PPI in the public mindset, however. Its new product, Income Shield, is linked to income rather than loans or mortgages. This, Johnson argues, removes the need for an increasingly risk-averse public to take out a loan and instead offers a flexible stand-alone product that can be used to cover a range of monthly outgoings including rent, council tax, school fees or even gym membership.

Other iniatives for the coming year include retraining mortgage brokers to sell general insurance products, increasing the volume of business done through call centres and expanding Paymentshield’s insurer panel to include more of the UK’s top 10 players.

Kamikaze style

So far, so good. But how does it compare with the cut and thrust of deal-making at CCV? Johnson’s face brightens for the first time. “I do miss it, because it was a period in my career that I am not sure I will ever repeat,” he says. “It was built up from scratch and it was quite rewarding to create something new.”

Would he like to go back? “Possibly, but I have already done that so I might look for something different. I have only been at Paymentshield a year so there is obviously quite a bit of work to do there,” he says more quietly.

Johnson is fond of telling how he first impressed Towergate chief Cullum with his kamikaze style on the ski slopes. He went on to further with this same daredevil attitude during his time at CCV. “There was never a cross word,” he says. “It has been an unbelievable ride.”

But what about the past year? “You would need to ask him that,” he replies. “But the feedback has been ‘so far so good’. We are well ahead of budget this year. We have changed quite a lot. Peter is big into transformation planning – if you don’t reinvent yourself, you risk moving backwards.”

Forward with the triumvirate

On that note, what is the next step within the Towergate family? He is not shy about admitting that he would love to step into Homer’s shoes. “That’s a great job and an interesting job, which looks after the whole shop,” he says.

“But possibly, the company is a big enough business now that you don’t have to have Andy’s job to have an interesting job in Towergate,” he muses. “At one point I would have said: ‘If I am not the group chief executive, I’m not interested,’ but the company is so diverse that there is a whole host of jobs that would be of interest.”

He points out that taking on the roles currently occupied by Nathan and Blanc could be a potential next move. “All three of us could do each other’s job if need be and they are all big enough to be of interest.”

On the question of rivalry with his two chief competitors he becomes coy, implausibly insisting there is little political manoeuvring between the potential successors. “We do joke about the competition,” he says. “The beauty of it is that there are three of us who could run the business as and when Andy trots off to his desert island.”

But despite his insistence that the three have equal strengths, he concedes he has the edge in deal-making and shaking things up. “If I had to pick one strong trait and the thing I most enjoy, it would be that: changing things rather than running a set-up machine,” he says. “If somebody said: ‘You need to build, you need to grow, you need to make some acquisitions, you need to change the business,’ that would be my favourite thing.”

Given his fondness for change, expect Johnson to be making headlines soon. IT