Peter Wood: Calm and in control

Peter Wood is an insurance legend. Having revolutionised the market with the founding of Direct Line in 1985, he went on to found Esure, famous for its adverts starring Michael Winner and also home to the runaway success that is Sheilas’ Wheels. Earlier this month, he bought Lloyds Banking Group out of its stake in the Esure business for £185m, in a deal backed by private equity firm Electra Partners. In a rare interview, Wood tells Insurance Times about the structure of the deal, the future of the company – and why he keeps such a low profile in the insurance market.

Can you explain the thinking behind the Esure deal?

The management buy-out is effectively a deal between myself, my management and new external investors to buy out the shareholding in Esure that used to belong to HBOS, but was inherited by Lloyds with their takeover in 2008. As many people know, the structure before last week was that Esure was 70% owned by Lloyds/HBOS and 30% owned by myself and other management. The new structure is complex as it involves incentives for performance but, in short, it means that I have a higher stake, management has a higher stake – how much depends on the return we generate – and the Lloyds stake is replaced by investors, such as Electra, who are aligned with our vision for strong, successful brands in a tough marketplace.

Will you now consider floating Esure?

This is the beginning of a long period of very hard work. There will be no ‘quick flip’. The general insurance market is a difficult place to be and we are committed to years of hard graft. The weeks after a successful MBO are not the time to even think about floating; people who start out thinking about floating companies tend to fail because their mind is elsewhere, thinking about personal gain rather than building a successful business.

I am lucky because my success in previous ventures means I am not desperate to cash in. Success interests me more and I am extremely patient.

Ten years on, is this your proudest achievement?

The one that gets me most attention by far is the creation of the Sheilas’ Wheels brand. My youngest daughter’s friends always thought I was just a boring insurance man but now they all know me as the man who created the Sheilas! I have street credibility for the first time.

The key to the business success of Sheilas’ Wheels was that people were looking at targeting segments of the motor market but no one really put the effort into creating a brand that would appeal to the segment that contains 45% of drivers. The success of Sheilas’ Wheels makes me incredibly proud. It was a fun way to realise a very serious business proposition.

What are your plans for the UK GI sector? Will there be more launches like Sheilas’ Wheels?

My plans for the UK GI sector are irrelevant. There are areas I’d like to look at more closely, like cover for the over-50s, but we have so much to concentrate on with our core brands that I intend to spend most of my time on them.

Who in insurance do you most admire?

I admire Warren Buffet because he is still as sharp as a knife in his late 70s. The brain is a muscle and it needs constant exercise. His continued success shows that the combination of practice, wisdom and conviction can take you to great places.

You’re considered a little elusive in the wider GI market. Do you have many friends in insurance? Do you avoid the market chatter?

I’m not elusive. I’m just busy and I don’t need to make friends among my competitors. Why would I waste the energy? There are people I know and like in the market, but I don’t listen to chatter. If it’s chatter, everyone’s heard it and where’s the value in that? If I am ahead of the game, it’s because I don’t tell the market where I see the next opportunities. No one saw Sheilas’ Wheels coming, and now it is the dominant female insurance brand.

Have you learnt any lessons from the financial crisis?

The biggest lesson from the financial crisis is that, despite all the time spent producing business risk assessments among the world’s biggest banks, no one saw it coming. People are necessarily focused on what they know; they don’t assess what they don’t know or can’t imagine. That’s where regulation needs to be less about box ticking and more about scenario planning.

How would you describe the problems at The Royal Bank of Scotland and, in particular, the plight of the Direct Line brand?

Direct Line was my baby, so no matter what I think of RBSI, I’m not going to slag it off. It sits at the top of a tough market and that’s a difficult place to be when price comparison has introduced transparency that in turn has increased churn. Churn is your friend when you’re small and growing. It’s rather different when you’re the biggest and need to find a way to keep your profits up.

People used to get three quotes before losing the will to live. Now they get 60 or 70 quotes using one set of details that they never have to enter again. This is a consumer-driven revolution and Direct Line is doing what is has to do, but it’s a bit of a King Canute position.

What do you think will happen to RBSI, and would you be interested in buying it back?

I have never bought any company with an eye to consolidate and lay off thousands of people. This is a market where business can be grown organically with good brands and enthusiasm. That is my forte.

What do you do for fun? Who is your football team? What’s your favourite film?

I keep fit – tennis, golf, cycling and the gym every day. I have supported Chelsea for as long as I can remember, and my favourite film is Pretty Woman. It was a perfect chemistry film between Julia Roberts and Richard Gere, and is full of humour. The shopping scene is one of my favorites of all time because I’ve seen it happen.

How would you describe yourself?

I’m much more approachable than people imagine. My staff knock on my door and we chat. I also read everything. In some companies, people produce documents in the hope that the chief executive will skim them and not notice the detail. If you give it to me, I will read it and remember it, and you have nowhere to hide.

What are your weaknesses?

My weakness is good Italian wine and if you tried the one I love, it would be your weakness too.

And finally, do you have any plans for Michael Winner?

I’m not sure I can make plans for Michael Winner. He is very much his own man. Not everyone likes him but everyone knows he’s incapable of lying or pretending, so he’s very powerful in a market where standing out is everything. We will be sponsoring his new ITV show Michael Winner’s Dining Stars because the link with us is so strong. IT