The news of Aviva’s new head was met with a collective sigh of relief from the broking world. Hodges may insist that his strategy won’t be that different, but his attitude certainly is. We speak to a chief who is happy to be all things to all men
Mark Hodges really is a nice bloke. Affable – and smart too. Masterfully, he walks the line between not saying a word against his predecessor as chief executive of Aviva, Igal Mayer, or his controversial strategies, and subtly indicating that he will be much easier to work with, much more flexible and, once again, a much nicer bloke.
We’re here with Hodges early on an icy December morning. We learn later that he actually stayed in town last night to avoid the interview being snowed off. Hodges has clearly come prepared to smile, to answer every question put to him, and to stay within the bounds of diplomacy. By and large he succeeds, though while he insists that there will be no shift in Aviva’s strategy, read between the lines and you would walk away with a different impression.
There’s a lot to get through, so let’s do a quick recap. Hodges’ appointment to the newly created position of overall chief executive of Aviva’s UK life and general insurance businesses was announced in October, to the widespread surprise, and relief, of the GI market. Already running the life side, Hodges has a strong pedigree in GI too, where he was managing director to Patrick Snowball’s chief executive, and put in a stint as finance director.
A familiar face among to the big beasts of the broking world, Hodges’ appointment was met with jubilation by those who had fallen out with Mayer over commissions and rates.
Some of those falling-outs were pretty bloody. Backed by Aviva HQ, Mayer implemented a harsh strategy of trying to beat the big brokers – the consolidators – down to size by reducing their commissions. Meanwhile, he attempted to woo smaller brokers with the launch of Club 110 and the Broker Independence Group (BIG), all the while trying to lead the market on rate rises. Not helped by the recession, events didn’t quite go to plan and at its last half-year results, Aviva announced a more than £200m drop in commercial premiums. Ouch.
Setting things straight
Two months later, exit Mayer, enter Hodges. So there are a few burning questions on the table today. Before we get down to the nuts and bolts, Hodges, young-looking, relaxed and always smiling, wants to set the record straight. “The key thing is that the strategy won’t be that different. You have to remember, I’m a member of the executive committee where all the strategies have been agreed.”
Fair enough, but let’s dig a little deeper. Mayer caused a huge stir in the summer of 2008 by publicly stating that commission plus expenses should not exceed 30% of premium (at the time, the largest consolidators were raking in upwards of 40% on some risks, so this was throwing down the gauntlet in no uncertain terms). Where does Hodges stand on commissions? “I would put them up or down – there’s no one-way bet here. Commissions will be dependent on the relationships, the quality of the book and the prospects over time.”
Music to the ears of the consolidators – as Hodges well knows, however much he may deny it. So are they relieved he’s in the chair? “No. People are far more worried about running their businesses than they are about personalities.” It’s a diplomatic answer, but belies the brokers’ delight over Mayer’s departure and the appointment of a friendly face.
Onwards, then, to rates. Mayer wanted to put them up, in the belief the market would follow. He did, it didn’t, and word has it they are now being quietly dropped again. Hodges denies this, but has an interesting response when asked if Aviva has a duty to lead on rate rises: “It’s a fallacy that as a market leader you have to be the person who leads the way. Leadership for me comes in many different forms; it doesn’t necessarily mean that you are the first ones to say ‘look, rates need to go up’.
“At the end of the day, we are in a market and it is competitive, and I’m not sure that just saying we are putting rates up and expecting everyone else to follow is necessarily the right thing to do.”
So, no shift in strategy? Uh-huh. This rings more true on less controversial issues. Where does he stand on MGAs? “An MGA that has a core specialism or skill that we don’t is something
I would be interested in. A whole market, ‘give me the pen’ kind of MGA? In my experience, that hasn’t really worked.” What’s the plan in direct insurance? “We will continue to innovate and invest over time.” Is Aviva still keen to stay close to the smaller brokers? “Club 110 and BIG are fantastic developments and absolutely remain a big area of focus for us going forward.”
What about this much-heralded return to the corporate risks arena? “There has been quite a bit of comment about this. It was a strategic decision that had been on the cards for a long time, and one I was very aware of. We see it as a natural extension of what we currently do.”
Speaking bluntly, you might say that there will be no big changes in strategic direction for Aviva – other than those sticking points, the ones that make or break relationships. Hodges will be leading a charm offensive and will be willing to bend and flex as and when necessary. Fundamentally, Aviva is hungry for business once again, be it from big brokers or small, SMEs or corporates. While he reckons it would be “daft” to target insurers that have done well out of Aviva over the past year – Allianz springs to mind – Hodges will admit: “We have got the potential to grow the business.”
He has appointed two chief executives to handle the day-to-day running of the GI and life businesses, respectively. David McMillan, former chief operating officer, will take the reins in GI, aided by Janice Deakin as intermediary and partnerships director. Sales and marketing director John Kitson will be leaving in March as planned (Hodges won’t play ball when asked if he wishes Kitson, an old friend and colleague, would stay on).
McMillan is low profile among brokers right now, so how will the all-important relationship management be divided between him and Hodges? “I wouldn’t see myself fronting relationships, but equally I wouldn’t expect to be sat in the shadows. I think it will be a mix-and-match type of approach.”
Let’s not put words in his mouth here, but it’s certainly easier to imagine Hodges picking up the phone to Peter Cullum or Chris Giles, or perhaps smoothing over the trickier issues during the course of a quiet dinner.
For anyone who bumped up against Aviva during the Mayer years, this conciliatory approach must be quite disconcerting. Is it not a little too soft? “Surely you’re trying to be all things to all men?” smiles Hodges, guessing the next question. “I’ve heard that several times and, unashamedly, I would say yes. Isn’t that in itself a differentiator?”
So there you have it. No shift in strategy, but a seismic change in approach, all done with a smile. Fair play – we can’t find a bad word to say. Good luck Mark and remember: the market’s watching. IT