What a year that was

It is his first anniversary at Fortis UK and managing director Mark Cliff is in a contemplative mood.

“It has been an interesting year,” he muses. This is an understatement. The past year would be better described as a stomach-churning rollercoaster for Fortis. After being caught in the eye of the storm of the financial crisis, it made a triumphant comeback to seize one of the biggest affinity deals in the marketplace.

But Cliff is a master of understatement. Last month, Fortis wrested control of Tesco’s financial services arm from The Royal Bank of Scotland International. This major coup will see the insurer write £500m gross premium and boost its UK customer base by 1.5 million.

On the mammoth deal, Cliff merely says: “Tesco is a big win for Fortis UK. We are delighted because it obviously brings jobs and capital to the UK … Fortis has always had a track record in supporting quality brands and protecting those brands through our ability to be efficient and provide high-quality service and market-leading products.”

But this cool response belies the whirlwind turnaround in the company’s fortunes. Last year, its parent company, the Belgian-Dutch Fortis Bank, joined the financial giants felled by the crunch, following its ill-fated investment in ABN AMRO.

While the general insurance operation recorded a £6m net profit for 2008, this was dwarfed by the parent company’s overall loss of £28m. As the pressure mounted, there was widespread doubt as to whether the insurer could emerge from the crisis unscathed.

These were not the ideal conditions for anybody on the cusp of joining a new company. But it must have been especially galling for Cliff after his successful tenure at AXA.

“The worst bit was two weeks prior to joining, when I was sitting at home watching it unfold on Bloomberg,” he says, with a rueful smile.

He is not the type of person who takes kindly to feeling helpless in his own living room. Widely known in the industry as “a big hitter”, at AXA Cliff established a sterling reputation among brokers, where he was head of distribution before being recruited by Fortis’s chief executive Barry Smith to oversee the company’s expansion.

But while Cliff offers a brief glimpse into the nail-bitingly taut atmosphere surrounding Fortis, he swiftly regains his trademark diplomacy.

“Clearly in Belgium there was huge turbulence. But in the UK we carried on. It was remarkable when I came in because no one talked about it. Everyone just carried on with their jobs and we just focused on what we had to do.”

Talk is cheap

If a code of silence prevailed in the inner corridors of Fortis UK, however, the buzz in the marketplace was deafening. Rumour was rife that Smith was searching for the backing for a management buy-out (MBO) and that Fortis could become a target in a new wave of insurer consolidation.

Cliff, however, is quick to echo Smith’s denial of the possibility of an MBO. “It sounds slightly bizarre but we just focused on the plans that we had. I probably saw seven or eight stories about how we are going to do an MBO. It was just rubbish.”

But why did speculation reach fever pitch then? “I have no idea …” he says trailing off uncertainly. “It was probably started by somebody with nothing better to do,” he adds gruffly.

“There were no other plans … I’m sure there would have been some investment houses that would have loved to have made that story in order to try to get business. And it just wasn’t true.”

He hangs his head momentarily, pursing his lips, leaving the PR to intervene hastily with a litany of Fortis’s achievements over the past year. On that, Cliff regains his train of thought. “Over the period where it has been tough and where we have seen a lot of our competitors lose top line, we have grown about 6% on last year and have grown our number of customers in what is undoubtedly a very difficult climate. We have got a very positive pipeline for new business going into next year.”

New lease of life

Indeed, Fortis has come a long way since those dark days. After its divorce from the bank, when it was bought by BNP Parabis, Fortis is now developing a new brand name for the group.

Furthermore, following the group’s strategic review in September, it also became one of only four separate operating divisions within the Fortis group. Previously, the UK was part of the European division.

Cliff freely admits that these developments gave the company a new lease of life. “That was the moment when we knew we could put it all behind us. Rather than focusing on trying to manage the messaging by saying everything is fine, it [the company] is well-capitalised, it has good solvency,” he says. “From that point of view, we could put our foot onto the accelerator.”

And Fortis has been moving at a remarkable speed. In addition to the Tesco deal, it has made further inroads into the commercial SME market by securing a five-year deal with Post Office Financial Services in partnership with Heath Lambert and launching a pilot scheme for the fleet market for 25 brokers. This has now been increased to 70 and Fortis plans to roll it out to all of its 2,300 brokers in January.

Meanwhile, it has strengthened its market-leading position in the private car insurance market by signing a deal with Toyota worth £20m gross premium.

Cliff makes no secret of his large-scale ambitions. He wants Fortis to no longer be seen as a niche personal lines insurer and points to the success of the commercial van product launched three years ago. “We are up to 100,000 customers. That puts us virtually in the top five for commercial vehicle insurers.”

Currently, the breakdown of the insurer’s business lines stands at 90% personal and 10% commercial. But if Cliff gets his way, this will change to 65% personal and 35% commercial within the next five years.

Furthermore, he anticipates that Fortis will be able to sit comfortably alongside market giants AXA and Aviva when it comes to market share.

“I think the opportunity for us is to provide a strong alternative in terms of a well-capitalised group with some very strong technical discipline and providing a high level of service. We would like our 2,300 brokers to put us up there; that they would mention Fortis’s name alongside those others,” he says. “I think with personal lines we are already there. Our challenge is to get out there and earn our spurs and credentials in commercial.”

He hopes the company will be able to command 15% of its brokers’ portfolio across both personal and commercial lines by 2013.

Cliff continually reiterates his commitment to the broking arena, adding that the company has no plans to invest in direct lines. “Our big focus is on the broker market … We very much see ourselves as the Intel of insurance. We sit behind people’s brands.”

Role model

The oft-maligned MGA model will also play a large role in Fortis’s development strategy. While many sounded the death knell for this model after Aviva and AXA shed MGA relationships, Fortis has led the revival. After AXA washed its hands of Primary, Cliff brought the relationship with him to Fortis. Meanwhile in June, Fortis signed a major five-year deal to be the sole capacity provider for a new MGA run by broker Kerry London.

But what of the doomsayers who say that MGAs were tailored for a very different economic climate? Cliff is unruffled by this pessimism. “There are a number of MGAs that has been around for number of years that have traded successfully. Unfortunately, those that perhaps have not performed as well tend to leave all MGAs tarred with same brush.”

But why will Fortis succeed where AXA and Aviva have failed? According to Cliff, the model is simply better suited to Fortis. “I think their decision to do that is quite right in the context of their market share and their distribution. In other words, what is the MGA doing for Aviva and AXA that they don’t already do on a broad base with all their brokers?”

“Obviously, the advantage for us is that we can develop specialisms and expertise in certain areas. For example, Kerry London will be good for leisure. We can work to get a strong position in a market segment that would have taken us far longer if we had to recruit expertise to deal with that … the advantage for us is that it helps us to move quicker.”

But others are less convinced the insurer has ­the groundwork and cultural mindset in place to match Cliff’s ambition. “Fortis always seemed a quality player. They have always put service to the forefront and have always enjoyed good operation,” a source says.

“The question mark is over whether they are going outside their comfort zone by doing bigger business and bigger brokers … This is a quite sleepy old-fashioned business tucked in Hampshire, with the other office in Cheltenham and Gloucester. They are not progressive people. I would have thought he would have a challenge to change the organisation.”

Cliff appears to have few qualms. He says the right conditions were already in place for Fortis’s expansion and they just required moulding. “I think the organisation was already moving pretty quickly when I came in. I hope I have been able to harness the firepower to ensure that we are pointing in the right direction.”

But he concedes the company is actively recruiting to help create the ideal team for future developments.

So what does the future have in store for Mark Cliff?

“Barry has done a fabulous job in building the Fortis organisation,” he says. “The first year for me is about learning about that … I think the second year for me will be about how I put my footprint onto the organisation, ensuing that we keep all those strengths that got us to the place we are today. I know we can be seen as one of the top five insurers in this country.”

If Cliff’s second year at Fortis is half as eventful as his first, the insurer’s fortunes will continue to grip the market for the foreseeable future. IT