Under the radar

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Lorica’s chief executive officer Matthew Bray and chief operating officer Carlo Marelli have been building solid foundations and are ready to break cover, they tell Emmanuel Kenning

▶ What brought you into insurance?

Carlo Marelli (C): I fell into it when I went for a job as a filing clerk. Minster Insurance had a trainee scheme which took me around every bit of the company. I chose commercial lines, did Chartered Insurance Institute (CII) exams, became an underwriter, then regional manager and moved on from there. It became GAN which is Groupama now.

Matthew Bray (M): I started in a broker. I took a trainee holiday job after A levels before going to university and never left. It was a little company in Buckinghamshire. My boss was a big sailor and basically, after two years, he left me to run the business and came back once a month. I went to work for a property conglomerate, they had an in-house brokerage, and we ended up buying that business and reversed it into another brokerage, which became GHBC.

Carlos and I were broker and underwriter since 1988. Things were coming to an end at Groupama and we got on well. Carlos’ ethos as a people person was ideal for a broker. He came to join us in 2001. We built up GHBC, went from about £4m [of GWP] to about £13m, and sold it.

▶ When you sold out in 2006 what was it like going from your own boss to being in a large organisation?

M: I was a regional managing director at Towergate and Carlo was managing director of Towergate GHBC. If you look at some of the consolidators’ models, a lot of what they did was very bright and worked. There were also things that weren’t working from our perspective. I quickly came to the realisation that some of the people were not turned on by the business model at all and it was difficult to see where the business model was going to address those issues. Having always run businesses on the basis that it is all about the people, eventually that is going to grind to a halt or cause you problems. My own view was that they weren’t being addressed and it wasn’t right for me. I left in January 2008.

▶ Why did you join Lorica in the second quarter of 2009?

M: I knew one of the people behind Lorica and we got talking about options. They introduced the collection of brokers which they were ambitious for. They had been put together and rebranded in 2007. The business had got to a certain level and needed to take the next step in its evolution. It was in a position where it was fairly static and we wanted to move it forward.

graph-broking-success-quote-1211▶ What was the strategy?

M: What we said was that we would build a head office infrastructure, which is an expensive way of doing it. But it is a firm foundation that we are now building on which enables us to build scale very quickly. The whole business is predicated on interest alignment – the business has to align with the clients’ interests. If the company does well, then the people who work within it should do well.

C: We have tried to take our old business and scale it to multiple branches. The ethos is good quality people.

M: A very important part of our strategy is to let the brokers broke. There are a number of businesses that we are aware of where you are very limited in your ability to broke and that disenfranchises bright, good broking people. Our strength is our talent.

▶ Some people don’t like change. What is the staff retention rate like since you joined in 2009?

M: We had a very high initial staff turnover where they really didn’t like the ethos – which was very much positive, transparent and moving forwards. They are not with us anymore, particularly in Birmingham. We are very ambitious people and, if your interests aren’t aligned, you have to be grown up about it.

C: We wanted to replace the people who didn’t want to be with us with better people. We have done that. There were quite a lot of changes in that first year, but since then it has been very stable.

▶ Was there GWP growth?

M: It was a bit of a moveable feast. We did lose some business with people leaving. It has grown a lot, for example, Hemel as a new branch is now the biggest branch. We also started Cornwall in September 2010, and that is motoring along nicely. 

▶ Would you buy a business?

M: Never say never, but it is not our model. We have a significant number of evolving opportunities. We will have a [London] city office coming on stream next year and a number of other locations. We are not going out and buying. We are cherry-picking disenfranchised, good people who fit culturally into our model.

We are absolutely adamant that we do not breach covenants. We don’t want it done to us and we don’t do it to others. If a team comes to us with the right ethos and culture and are our kind of people we will be very open to backing that.

▶ What is your client base?

M: We deal with plcs all the way down. We’ve segmented our business into SME commercial, corporate and private clients. The SME side is becoming increasingly technology centric but we believe a combination of the right people with smart technology makes a compelling proposition. In private clients we do standard business but are pushing into mid and high net worth because it is very complimentary to our corporate accounts. For international business we also have correspondent broker relationships in lots of places like Tokyo, Germany and the USA.

▶ What areas do you plan to invest in?

M: Leisure is a case in point. We have quite a lot [of clients] and have attracted a team of experts into our business. We have spent a lot of time thinking about how we market that business and are increasing our footprint. It is quite a wide area of the UK economy and increasing quickly.

▶ What insurers do you work with?

C: You want to have a really good relationship but you can’t have that with 200 insurance companies. We do have a premiership panel that we like to work with, but our brokers are free to work with anyone on our agency base. We have got 80-90 live agencies.

▶ What do those insurers you have relationships with do well?

M: They provide products that our clients want – a claims service is very important. The acid test of insurance is the claims service, what do they do when the proverbial hits the fan? That is very important.

C: It is about underwriters that you can talk to about issues, agree things with and who have the authority. To get a good development underwriter makes a huge difference to the relationship.

▶ Was it hard starting again in a soft market combined with a recession?

M: If you start it lean and it is hard work, relatively, it can only get better. You are not going to be lulled into a false sense of security by the environment, meaning that you do well rather than your business. If your business is earning and the environment improves you are in a very nice position.

▶ Why have you been relatively publicity shy until now?

M: You know what, we have deliberately flown below radar. We were getting our house in order and ducks in a row and making sure that internally everybody understood where we were going. We have spent a lot of time on internal culture. There’s no point us prophesising externally about what we are about while our people don’t know that.

▶ You mention a multi-branch approach. Has communication been a challenge?

M: We have a very connected business. We have put in place a great intranet that is very heavily used. We segment the business in 
lots of different ways. Traditionally, in brokerages, everything has been geographical or by sector, such as private clients or corporate or mono-line, even in really big brokers. We have tried to take that away. We have said ‘yes, you are Cornwall, or Birmingham, but also you as a group are corporate account executives’, so they have regular get togethers too.

Even when we are sceptical we back new initiatives where there is some passion. We have got bright people, we have to set parameters and let them work within those, but there is no point micro-managing really bright entrepreneurial people.

▶ Are you profitable?

M: We are absolutely where we want to be in terms of profitability. We are cash generative now. Next year we become increasingly profitable. Having built a factory that is fit for purpose as a solid foundation, it doesn’t take a rocket scientist to work out that, when you pour GWP in, the proportionate cost of your factory diminishes quite quickly.

We were investing in our business to make it fit for purpose for the future. Losing money? Yes. And we are still investing, but will our next year’s accounts show that we are profitable? Yes they will.

▶ Again you mention pouring in GWP. Will you hit £100m by 2015?

M: We want to be north of there. My belief is that there is a lot of hype about where people are trying to get to. I think you need to do it on a staged, scalable basis, otherwise you can create a monster that doesn’t work.

▶ Hiring Paul Meehan certainly raised your profile. What will his role be?

M: Paul is a non-executive director who is very well known and connected. His ethos is very similar to ours: customer centric. Do we have significant acquisition [of people] plans that interest Paul? Absolutely.

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