Interview: Philip Gregory

“Life has been interesting since HSBC,” admits Philip Gregory. The former HSBC Insurance Brokers’ chief executive has been taking it easy since his departure last year, but now he’s ready to embark on a new chapter in the corporate sphere. However, while his eyes are firmly set on the future, there’s one story he’s still keen to tell.

Looking relaxed and ready for anything, Gregory is speaking for the first time about his chaotic three years at HSBC. It is little more than one year since HSBC agreed to sell its broking business to Marsh in a £135m deal. And it’s clear Gregory has a weight off his shoulders.

Earlier this year he took on his first non-executive role, becoming chairman of private equity-backed healthcare business Medicals Direct. He’s on the lookout for other roles, perhaps in broking, but more on that later.

What really gets Gregory talking are the events that led to his exit from HSBC and retirement on 7 July 2010, his 55th birthday.

When he made the move from chief operating and chief financial officer at Marsh’s Europe, Middle East and Africa division to HSBC broking boss in May 2007, Gregory’s brief was simple: to turn around an ailing business that hadn’t grown its revenue in seven years and only made a small profit. As a banker turned broker, he was clearly the right man for the job. But the long-term future of this ‘sleeping giant’ was unclear.

“The message from the bosses was: ‘Here’s a company; it’s not doing very well, it’s not as connected to the bank as we’d like. What are we going to do with it?’,” he says. “It was very much a case of not knowing if the role was going to be for nine months or nine years.”

The task at hand

Gregory kicked off with a strategic review of the business and it quickly became clear to him that there were synergies to be built on between the insurance broker and the bank. But there were still doubts. “The sticking point was whether that synergy was worth enough profitability for HSBC to be interested in it. You could get £10m more new revenue from the links with the bank, but that would produce you around £1.5m more profit. And if you split that with the bank, was that £750,000 extra for the bank really material, in a context where they measure profitability in billions?”

Despite feeling like he could be fighting a losing battle, Gregory set about his task of attempting to deliver profitability by integrating the broking business into the bank. But, like most, he was unaware of what was just around the corner. Fast forward to October 2008 and the global financial markets were in meltdown. The banking crisis had arrived and Gregory’s world at HSBC was about to turn upside down.

“The role changed with the banking crisis,”

he explains. “HSBC looked at its strategy much more clearly, and selling off and divesting the non-core banking activities was worth more to it than any synergies.”

Waiting to be chosen

The following January, Gregory’s role shifted from an integration exercise to cleaning up the business for sale, intended for 2012. “The ideal situation would have been to have had a nice five-year track record, which everybody likes to see. But it was always understood that at some stage one of the big three or four would come and tap you on the shoulder, and that’s exactly what happened.”

In September 2009, multinational broking giant Marsh came knocking. An approach was made to the HSBC chairman. “We produced forecasts and an information memorandum, and a deal was done very quickly. It was a valuation that was good for HSBC and Marsh,” says Gregory, who admits the offer came out of the blue.

“It just happened that Marsh was the first one. I wasn’t expecting it to come so soon. But when you run businesses, that happens.”

As expected, Gregory was central to negotiations. Having joined from Marsh three years earlier, he often found himself around the same table as some familiar faces. “It was a big exercise but I had a good team. Rather oddly, many of that team were people I had taken out of Marsh. When I came out of Marsh, lots of other people were leaving.

"There was actually one meeting I went into where everybody in the room had previously worked for me at either Marsh or HSBC. I think half of them I had recruited, which was very helpful.”

Before the deal was eventually agreed in December 2009, reports appeared in the press after Insurance Times revealed that Marsh was eyeing the business. Gregory was unsurprised at the timing, though he does admit it had an impact on the negotiations, described by insiders as tortuous.

“The whole of November was taken up with due diligence. The discussions were condensed into two weeks in December. Unfortunately by then the press articles had been out there for three weeks, so it looked like it was taking a long time. It does make it much harder; there’s just more pressure on being able to keep the business going when people wanted to spend a lot of time asking questions [about their future]. People lose focus because of that and it was very difficult. And inevitably your competitors stir it up.”

So how did Gregory handle the questions from HSBC Insurance Brokers’ 1,500 staff worldwide?

“You could only tell them the truth or all that it’s sensible to know at a time,” he explains. “And actually the line all along was never to confirm the rumours.” Referring to the staff that lost their jobs, he admits that an inevitable consequence of such a deal is duplication.

So what now?

Gregory insists that, from the outset, he had no intention of rejoining Marsh. He recalls meeting with Marsh chief executive Martin South at the outset of discussions, at which point it was agreed he would not switch, for two reasons.

“When I went to HSBC, I was able to promise them that, whether it was nine months or nine years, I would stay till the end. That’s not what I felt I could offer somebody else now. Secondly, and quite critically, I think it is very difficult, and not wise, to go back to an organisation, especially when you only left that company three years ago.”

Gregory’s final record at the business speaks for itself. By the time the Marsh deal was sealed, revenue had risen 10% to around £165m and profits spiraled from £4.5m to £19m in three years.

A self-confessed ‘jack of all trades’, Gregory spent 10 years as a banking specialist at KPMG in his early career and is comfortable talking accounting, insurance or healthcare. But he’s keen to return to the insurance market in non-executive roles.

He even fancies joining the board of a consolidator or an insurer, despite admitting he has never once been on the trading floor at Lloyd’s. “I didn’t come [into insurance] with a big deep knowledge of how you broke a slip.

I came with a knowledge of all different corporate activities. All of my specialist knowledge is about strategy, organisation, how you do it.”

Don’t be surprised to see him back soon. IT