Tactical moves

Layton Blackham first appeared as Professional Broking's 'Broking Success' in November 2000, having completed its 14th acquisition. Three years later, Layton Blackham is approaching the £100m premium income mark, despite having made no more acquisitions.

"We have spent the last three years consolidating and developing a sales force," explains Blackham. "We have now paid for 99% of our acquisitions and are debt free and so I plan to start acquiring again. I believe we could reach £30m commission income in five years."

Blackham wants to invest in small to medium-sized commercial brokers, preferably with some high net worth business, but has also set up an exclusive network offering and a franchise operation for businesses that wish to retain their independence. Elite, Layton Blackham's own range of products, will be made available to these brokers. Blackham believes that setting up a network is a logical progression for wholesaling brokers, given they already have the contacts and products in place. He has invested a six-figure sum into the project.

Much of this money has been invested in technology. The brokers that join Blackham's partnership initiative will use Acturis software to trade online and Blackham has also invested in an SSP underwriting system, Mavern, for the Elite product range. He hopes to underwrite 90% of the Elite products online by the end of 2004.

Wholesaling currently accounts for only 5% of Layton Blackham's income but Blackham believes this figure will increase in future. "Elite already writes £20m premium income and we aim to take this to over £50m online," he says. He continues: "Larger commercial and HNW products need personal service but that doesn't mean that you can't use electronic trading to exchange information."

But Blackham warns that the future of wholesaling for smaller players could be in doubt if the Financial Services Authority takes a hard line on its rules. "A lot of questions are as yet unanswered," he says. "But the main issue for the FSA and the market is who will be willing and able to take responsibility for what."

Overbearing regulation

All in all, Blackham is not enthusiastic about the overbearing regulation that will be required by the FSA. He warns that the General Insurance Standards Council will seem an idyllic honeymoon compared to the harsh day-to-day reality brokers now face.

"I'm all for the discipline and professional standards the FSA brings," he says. "But brokers will end up having to conform to heavy and inappropriate levels of regulation."

Blackham recently reorganised his company's finances, changing Axa's preferential shareholding into a minority ordinary shareholders contract.

Axa will now be involved at a strategic level but not in the day-to-day running of the business. Blackham insists Axa's investment is on an institutional basis and does not prejudice his company's choice of insurer, pointing out that companies such as Royal & SunAlliance have always invested in brokers. "It just means I have the backing of a world-class company," he says.

Blackham believes that financial security is of primary importance, and says this approach served Layton Blackham well when Independent went bust in 2002. "We negotiated a rescue package for the market with Axa the week before Independent went under," he says. "All our Independent clients were automatically covered."

Blackham claims a combination of luck and of knowing his business and markets meant he had enough information in place to make this move. "We kept our ears to the ground and were sufficiently concerned to construct the rescue package," he says.

Although Blackham is also concerned about the financial security of other markets in the insurance industry, he says brokers should go easy on insurers.

He explains: "If everyone whispers that a company is unstable it becomes true. It's time we backed our partners."

LAYTON BLACKHAM

Chairman: Chris Blackham

Established: 1984

Number of offices: 11

Number of staff: 350

Gross premium income: £100m.