An ambitious future1st September 2014
Rob Childs talks about his objectives for the company and his desire to develop the next generation of leaders for the business.
What are your ambitions for the company?
As Chairman my biggest objective is to grow the firm’s net tangible assets, because it’s that which underpins our share price. I’d love to see our share price hit £10, and I’d be very pleased if we gained entry eventually into the FTSE 100. I’m keen on having financial targets as a big part of my vision for the future. After all, we’re here to make money, within the framework created by our corporate values. It’s our goal, and it’s the basis on which everyone is remunerated.
How do we reach our financial goals? By becoming leaders in our chosen markets. That means striving for leadership in service, pricing, underwriting, claims and marketing. We are on a continuous journey to achieve this, along with our business partners.
How would you describe your management style, and how does your role differ from Robert Hiscox’s?
Robert was Executive Chairman of the Group, whereas I’m non-executive Chairman, so there’s a big difference in our roles. Having said that, I spend a lot more time doing this job than a non-executive chairman of a company the size of Hiscox normally would. Another important difference is that Robert was effectively the founder of this company. He was Chief Executive before becoming Chairman, whereas I was Chief Underwriting Officer. So my transition to this job was very different to his. Also, I’m 10 years younger than Robert, and so we look at this company through very different eyes. He retired having transformed Hiscox from a tiny firm into a FTSE 250 company. I want to see Hiscox in the FTSE 100 before I retire as Chairman. That ambition affects my management style and how I look at the business.
This is a company that now has nearly 2,000 employees and around $2.5 billion in premium. I could easily see it with income of $10 billion and employing a lot more staff around the world. The challenges I’ve inherited will affect my management style. For example, we bought a business in Asia this year, so we now need to think about how we run a company with operations in three, rather than two, continents.
I played a big role in Hiscox’s geographic expansion, by setting up our operations in Bermuda and the US, so that’s bound to affect the way I look at this business.
So are you looking for the Group to expand further overseas?
Our vision for the future is built around our strategy, which has not changed since I started working here back in 1986, and I don’t see that strategy changing in the future. We specialise in a number of small-ticket lines of business, which we want to sell throughout the world. Those lines balance our big-ticket business, which we expand and contract depending on market conditions.
We are looking to expand our distribution, so we sell our existing – or a slightly enhanced – range of products in new markets, rather than significantly expanding our product range. That means that if we see other opportunities to sell more around the world then we will take them.
The UK will no longer be the Group’s prime focus, because we have growing operations elsewhere. If we can get it [overseas expansion] right, then it creates an important new source of balance within our business. We have created balance through our product range; now we are creating geographic balance as well?
Can you explain the decision to acquire DirectAsia?
We had previously described Hiscox as being “a Western Hemisphere company”, simply because it was a statement of fact. But we’d never said no to Asia, simply no for now. But now is the time.
There are two crucial factors in growing a business. First, you have to be able to afford any bets you take. Setting up a new business means that it will usually take several years before it breaks even, so you need to be careful because it will hit your P&L statement. Second, you need to have the management capability to take on these extra challenges. You want to stretch your managers, but not to the point that they break. Our operations in Europe, Bermuda and the US have started to bed down, which meant we could start to look elsewhere for new opportunities.
We knew the management team at DirectAsia; in fact, we had been talking to them, on and off, for a number of years. It is a direct-to-consumer business, which fitted our strategy, and is in a continent that represents new territory for us. Also, it wasn’t a start-up business. It’s slightly unusual for us, to the extent that it is a motor insurer, but most insurance written in Asia is compulsory-purchase business, such as motor. As its market and brand develops then we should be in a position to add some of our other products to its range.
Should we read anything into the fact that it was an acquisition?
We have bought companies in the past, but this is bigger than previous acquisitions we’ve made. But I don’t think this is a new beginning. We knew the people behind it, and it also happened to be on the same IT platform that we’re introducing across the Group. So it just fitted well with our existing business in several ways.
It’s not a new blueprint for growth, but we have now done a relatively sizeable acquisition – for us – so it will be instructive to see how successful we are in integrating it. But it’s still true to say that we’re more comfortable with organic growth.
Does it matter if other companies adopt strategies very similar to Hiscox’s?
Adopting a strategy and delivering that are not the same things. You start with a vision you can articulate, then devise a strategy that fulfills your vision. Finally you need plans to deliver your strategy. Ours requires hard graft: you need to set up the offices and hire the people to sell our products throughout the world. If you want to grow quickly, it’s much easier to hire a big hitter and seat him at a box in Lloyd’s. He can give you a lot of premium volume in a hurry, particularly in a soft market – although he might not produce much of a profit for you. Imitation is the sincerest form of flattery, but ‘twas ever thus. We need to remain nimble and to keep developing, by improving our expertise, delivering a better service and products to customers. We also need to continue to develop our brand. All of that takes time.
Bronek Masojada, Hiscox’s CEO, said the executive management team used your appointment as Chairman to help redefine the Group’s ambitions. What have you agreed?
Well it wasn’t something new, as we did a very similar exercise about 10 years ago. Back then, the challenge was whether we were content with how we were or did we want to grow Hiscox to become a force in the insurance world? We decided we wanted to grow, so then we asked what we needed to do to achieve that. The answer was for us to get on our bike and grow our distribution. The result was that we set up operations in Europe, Bermuda and the US.
This year we asked ourselves whether the way we run the business now will help, or hinder, our ambitions for the company over the next 10 years. We concluded that some of the ways in which we operate could confine us in the future.
The nub of it is a recognition that what got us here may not get us to where we want to be in the future. We want managers to understand that their future lies, to a large extent, in their own hands. Perhaps to a larger extent than they had thought previously. Each business unit should set its targets and encourage its people to grow. When we were a young business we took big bets on young people; we want to do that again to help develop the next generation of people who could run this company.
It’s really about asking our people to take more risk with their careers, to take more responsibility themselves. For example, since we bought DirectAsia we have had plenty of employees who have asked about postings to Singapore. They want to help us to develop it – and themselves. That’s great, because we want more people to be willing to carry the flag for us?
Every employee should feel that what they do individually will make a difference to the company. That was relatively easy to do when we were a small firm, but has become more difficult as we’ve grown. That’s not to say we lost that spirit, but we want to re-emphasise it to help regenerate the company. We want our employees to feel they are also the owners of the business.
Why did you reaffirm the corporate values?
Well, we’ve always had these values. We asked whether we thought these values remained valid in our company today; the general consensus was that they were, although the language in which some of them were expressed was brought up to date. The ideas didn’t change, simply how they were expressed, in some cases. Having reaffirmed the values, we want each of our employees to consider how they themselves can put them into action. These aren’t simply ideals that should guide the senior management team; we want everyone to be on this journey.
For example, courage is a core value of ours, one which few other companies have. You could say that our executive team was courageous in expanding beyond Lloyd’s, and then setting up new operations overseas. But we don’t want our staff to simply applaud the courage of others. We want to challenge them to be more courageous themselves in their work.
Could this introduce more risk into the business?
It could, conceivably, but we’ve also done a tremendous amount of work on this. Solvency II has made us re-examine our analysis of risk, while our work on our values has also made us re-examine how we view ourselves. Both have been very hard work, but I think they’ve also made us a better company.