Peter Cullum

In the Past 12 years, he has revolutionised the UK insurance market. He has prompted countless imitators, detractors, and fierce rows with some of the country’s largest insurers. He controls £2.8bn of premium and employs 5,000 people.

He has purchased 209 businesses at a total cost of £977m. He is loved and loathed in equal measure by fascinated peers and rivals. He has made careers and broken them.

And today, Towergate chairman Peter Cullum is with Insurance Times at his Maidstone head office to talk frankly about his journey to the top, his plans for his sprawling business empire as he approaches retirement, and life after the boardroom.

Because of his almost unparalleled success in the insurance world, Cullum is surrounded by rumour, hype, resentment and myth. People have been burnt by Towergate, people have lost out and, yes, people are jealous and waiting, hoping for it to fail. But in the flesh, Cullum is genial, pleasant and polite. There is no denying his unique business model has enjoyed extraordinary success. There have also been some gut-wrenching lows, of course, such as the failure to complete the £800m sale of a stake of the business to private equity house Candover just before the market turned.

At the head of it all, Cullum has the presence to conduct crunch negotiations with powerful insurers and lenders without blinking, alongside the charm to form the crucial relationships with partners that mark Towergate out from the herd. He has also had the strategic foresight to build a group of businesses that may look random at first glance but is actually anything but. And as he plans for the next stage in the group’s life – an IPO in two years or so – and for the end of his own role, he remains passionately engaged. He has a few big plans left before he goes.

The early days

In the heady days of 1997, when Tony Blair rode to power on a wave of optimism, and the country sang that things could only get better, Cullum was working for Robert Hiscox, who had acquired his underwriting business, Economic Insurance, two and a half years after an MBO led by Cullum and a few colleagues. The experience had given Cullum a taste of being his own boss.

“I was probably unemployable by then,” he muses, relaxed and comfortable at the bleached wood boardroom table in Towergate’s HQ at the edge of a snow-covered business park in Kent. “When you’ve run your own thing, getting back into big corporate business isn’t what you want to do. It was almost a reckless decision in some respects.” So, after just a year with Hiscox, the entrepreneurial spirit took over: Cullum resigned and Towergate was born.

This drive has shaped his entire career.

Cullum is known for his fierce intelligence and tough negotiating skills and, as he speaks, you sense the big mind working away behind the scenes. But unlike the traditional insurance brain who runs an insurance company, or the charmer who runs a broker, Cullum does both. And smart as he is, intelligence isn’t even his defining quality. It’s entrepreneurialism: a drive to do something different, to build something, and to own the results.

With a few former colleagues – “it was all very tribal; I don’t apologise for that” – he started buying small niche firms to write risks that the big insurers wouldn’t.

“At the time, insurers weren’t very interested in niche business,” he recalls. “It was cheap rates and high commission, and it wasn’t going to work for them. We felt there were some opportunities.” And so the spending spree began.

The most significant acquisition was in 2002. Following Towergate’s initial success, Cullum decided to expand into regional broking and bought Folgate. He recruited Andy Homer, then chief executive of AXA, to run it and the pair began buying up businesses across the UK. It’s significant, and often forgotten, that underwriting came first for Towergate – and that Cullum and Homer, like most of their colleagues, have an insurance company background; they were not born brokers.

Building blocks

People have always been important to Cullum. His friends always speak of his loyalty, and his backing, whether personal or financial, has guided more than one high-profile career.

“If you want to have a good company, you’ve got to have good people,” Cullum says, leaning forward and gesturing for emphasis. “It was one of the biggest challenges in the early years, convincing big hitters like Homer to join. I said: ‘You will enjoy this; it’s different, we’re going to change things’.”

And they did. In 2005, Towergate and Folgate were integrated into one and Towergate went stellar, eventually buying 161 broker businesses. It also bought the country’s biggest network of independent brokers, Broker Network, mortgage protection business Paymentshield and, to the surprise of many, software company Open GI for an astronomical £276m.

At first glance, it might seem an odd collection of companies, but look again. “It’s a distribution business,” Cullum explains. “Ever since 1997, my entire strategic thinking has been about distribution. Otherwise this would just be a group of disparate, separately run businesses that have no link.”

He jumps up from his seat and brings out a corporate brochure, where all the brands are printed side by side. Excitedly, he talks about how Broker Network brokers are offered (but not coerced into buying) the underwriting products; how Paymentshield will expand its range; how £6bn of premium goes through Open GI each year and the “massive opportunity” this provides.

The new baby is PowerPlace, a commercial lines e-trading platform developed by Open GI but now owned and run separately, for which Cullum has huge ambitions. In fact, if you want to read the future of the broking market, a glance at his business plans isn’t a bad start. E-trading; MGAs; broker networks – that’s the story of this decade.

Not in the brochure, but of equal importance, is CCV, Towergate’s younger cousin that buys up smaller brokers or takes stakes in them.

“We have tried to focus people’s minds on the importance of distribution,” he says. “Before Towergate came along, I don’t think there was enough recognition of the importance of brokers.”

No regrets?

This takes us to 2008 when, following discussions with a number of private equity houses, Cullum and?co entered detailed negotiations with Candover, and were on the verge of selling a 25% stake for a reputed £800m, valuing the total business at £3.2bn. Then bam! The deal was nearly sealed, the shareholders were counting their money and then, suddenly, it was all off. What happened?

“It was a way of releasing funds to the shareholders and that would have been the ultimate route to an IPO,” Cullum says carefully. “But these private equity guys are serious poker players, and they have a reputation: near the end of a deal, they will always try and tweak it in their favour.”

Put the price down, in other words. Cullum wasn’t standing for it. “The whole morality of having agreed something, completed the paperwork, and then being hit with a negative change made me ask, do I want to partner with people who behave that way?”

He and Homer decided against the deal, though he insists the other shareholders were kept informed, amid market speculation that some were less than happy to see their millions disappear. Thanks to the recession, Towergate’s market value is now far lower. Does he regret having walked away at the top of the market?

“No,” he says quietly and pauses, thinking. “Money is one thing. It’s important – it would be stupid to say otherwise – but you have to have the right partner, and for us it just didn’t feel right. We would probably have had some difficulties [had it gone ahead].” Given the vast sums of money under discussion, and that Cullum and Homer have had to stay on longer than planned, it’s hard to believe there are no regrets.

But life goes on, and while some other consolidators born in the wake of Towergate’s success are struggling, the future’s looking pretty rosy for Cullum. There was a sticky patch last year when the highly leveraged business had to renegotiate its all-important banking covenants smack bang in the middle of the banking crisis.

He refers to larger banks syndicating loans onto smaller banks – standard practice – but those smaller banks then getting into trouble elsewhere and wanting to pull back all their loan facilities. “We had a period in 2009 where it was the worst time ever to be reconstituting the financial foundations of Towergate,” he says. “I suppose the lesson I learned is: know your bankers very, very well.”

In the end, thanks to some fancy footwork from Homer and big wads of cash from the major shareholders (Cullum and Homer included), a deal was eventually reached with no fewer than 10 banks.

The next steps

No one could accuse Cullum and Homer of failing to plan for succession. They have let it be widely known that underwriting head Clive Nathan, Paymentshield chief executive Tim Johnson and retail broking boss Amanda Blanc would run the business after them. They have adroitly built the trio’s public profile and attempted, albeit with limited success, to step back from the limelight themselves.

Just a few weeks ago, they announced Blanc’s promotion to the new position of deputy chief executive. To Towergate watchers, this seemed a clear indication that she would succeed Homer, but Cullum is keen to play it down.

“It’s not a big deal,” he says. “Amanda has a new position because as well as the retail broking business, she now has PowerPlace and Broker Network. We wouldn’t want people to read into that that she is the ‘chosen one’ and will be ‘anointed’ some time soon.”

This latter sentence is uttered with wry humour, but he adds: “She is seriously good; one of the most driven people I have ever known, with a huge capability.”

So, if you believe Cullum, the exact nature of the succession is yet to be decided, though it’s clear the three will be running the business in some shape. An IPO, however, is practically a dead cert, with 2012 the likely year.

There’s a lot of work to be done first, however. Cullum’s many businesses are separately owned and financed. Open GI, PowerPlace and CCV, for example, are all legally separate to the Towergate group, though they are run as part of the ‘family’. Will this have to change before a flotation?

“There might be some pressure from institutions for us to do that,” Cullum admits.

A little later, he adds: “There is every likelihood that if we were to do an IPO, CCV would become an integrated part, because otherwise it would be a confusing message to an institutional marketplace.”

And all this against the backdrop of a lingering recession. Cullum reckons 2010 will be every bit as tough as 2009, which has seen Towergate lay off 300 people (though it took on 100 new employees too). After that, he foresees a resurgence in the market, with a return to M&A activity and numerous flotations.

He and Homer will have to stick around for up to a year after flotation, to keep the investors happy. Which means he’ll be working day in, day out until 2013. He winces, then laughs: “It’s not an endurance test for me; I love what I do. I say it’s time to get out of the way, but only because there are people ready to take over. If you had asked me two years ago whether it would be difficult to walk away, I would have said yes. There’s a right time to get out of the way. If I was surrounded by a load of numpties, then I wouldn’t do it, but we have got some really, really good people. And there are other things I want to do with my life.”

Beyond the boardroom

Cullum is believed to be hugely generous with his personal wealth. Details are scanty, because he shies away from publicity for this, though he does confess to a friendship with Richard Branson, and refers to a trip to some charity projects of Branson’s in relation to HIV and AIDS sufferers in South Africa. Cullum is involved with this, as well as with charities for deprived children and endowments for budding entrepreneurs. Last year, he provided £10m to form a new centre for entrepreneurship at Cass Business School.

There’s also a bit of Bill Gates in Cullum, it seems. “My children get hyper-tense when I say this,” he smiles, “but I want to give most of my money away in my lifetime. It’s selfish in some respects, but I want to see the difference I can make.”

Is there a contradiction between the public perception of the big, scary businessman who takes no prisoners in negotiations, and this softer, philanthropic side?

“No,” he says, and moves into a more general argument. “Find me one person who says I reneged on a deal. I don’t renege on deals: when

I shake hands, then that is what we do. I think we have a high level of integrity. There’s a perception that we strong-arm everyone. We don’t.”

Cullum could be forgiven for sounding a little defensive, because he comes in for an awful lot of criticism. Rivals and partners alike love to watch Towergate, to pore over its financial results, to gloat at any high-profile defections and to wait like latter-day Cassandras for the whole edifice to come tumbling down. Cullum knows it, too.

“This is the British disease,” he says. “When something is successful in the UK, people are always looking for the chinks and almost applauding the prospect of failure. If you go to the USA, it’s very, very different. You become a hero if you’ve got a successful business.”

No chance of that here, Peter. But lately the muttering about Towergate does seem to have died down. Perhaps it’s becoming part of the establishment – or perhaps a few high-profile rows with certain major insurers united the brokers against a common enemy? Certainly, when the crunch negotiations over commissions and rates were happening with Aviva last year, Towergate was at the front of the pack.

Cullum declines to comment on relations with former Aviva chief executive Igal Mayer, but you get the strong impression that there was no love lost. Towergate moved a little less than half its book with the insurer – some £200m – to other carriers at that time. Now Mark Hodges has taken over, some of that premium will be returning to Aviva.

There are lots of other plans afoot. As well as the crucial development of PowerPlace, Cullum plans to widen Towergate’s underwriting footprint, launch new products, be the first MGA to open a box in Lloyd’s, break the £3bn premium mark this year, keep on acquiring brokers, prepare for an IPO, and, well, the list is endless.

Although Cullum says several times that he is ready to retire, passion still lights up his eyes when he talk about these plans. “I want to get to over £3bn this year,” he says emphatically, almost rubbing his hands with glee. “I want to do things differently.” Whatever changes he makes, one thing is sure to stay the same: the Cullum bandwagon will keep rolling on.