Igal and Towergate

A lot has been written about Aviva, Igal Mayer and Andrew Moss over the past month. But it is the consolidators and, notably Towergate, who will be feeling the most gleeful following the negativity surrounding the UK’s largest insurer. But this doesn’t reveal the full picture of events. Along with the financial crisis and recession came Igal Mayer’s strategy to pull vast chunks of unprofitable, high commission payout business from a group of powerful broking outfits, led by Towergate. It was not a popular move amongst the consolidators who were pocketing commissions of up to 40% and whose models were built on the promise of premium certainty and growth to twitchy investors and banking backers. It was just the whole thing had been negotiated amongst a heap of goodwill among the Aviva old guard and specifically under the watchful eye of fomer chief executive Patrick Snowball and managing director Mark Hodges, who is to now return to the GI fold to head up a combined GI and life division. Snowball, ironically, went to work for Towergate before recently upping sticks to head up Suncorp in Australia.

But it was Igal Mayer who was brave enough to make a stand. And to many within the consolidator set it wasn’t just that he made such drastic cuts but it was the timing of the decision to pull back. It felt personal to negotiations that had been favourable for nearly a decade throughout the good times. For Towergate, specifically, combined with the economic gloom and the stream of acquisitions drying up, it came at a time of drastic action. There were reports of breaches of banking covenants, redundancies, cost cutting and even the annual company shin-dig to Portugal being replaced by the cold reality of the gloom of England. Its key founders, led by Peter Cullum and Andy Homer, put £10m back into the business as part of negotiations to spread its debt across numerous banks. As the acquisitions dried up, so did the dream to ride off into the sunset. The other ambitious consolidating houses watched on whilst turning red with rage at the seismic changes to the market and the economy. Talk of growth was replaced with rhetoric about stability and survival. All the consolidators felt the strain. Whilst other insurers soaked up some of the business passed on by Aviva those with most to benefit from the controversial strategy kept a low profile and kept public appearances limited to rating rhetoric. So it is easy to see why the Aviva’s strategy felt a little personal to the few who suffered the most impact, but that is not to say that it is not a sound set of tactics even if it didn’t play out as first considered. Going forward Mark Hodges, and whoever he appoints to lead his broker relationships, will be judged on the quality of the negotiation and ultimately the premium numbers. Aviva will continue to target independent brokers in the short term but it will be the depth of its relationships with the super regionals and national players which will make a difference to its numbers of the next 12 months. And Towergate, for one, will be hoping it can get the relationship back on track in some form or another.