The evolution game

Peter Beddis, chief executive of Beddis & Partners, never aspired to become a large national broker but, following the acquisition of his firm by Oval in December 2004, he is starting to enjoy the opportunities that come with belonging to a large parent firm.

Although Oval was the successful suitor, Beddis had fielded interest from various other parties before the deal was finally done. "As a successful broker in a city like Birmingham - a much sought-after place to have a regional presence - we had a lot of approaches, but the business was not for sale," Beddis explains.

However, when he was approached by Phillip Hodson, who explained Oval's plans and philosophy, the deal was taken to the next stage. "That was the first time anyone had reached the stage of making a concrete offer for the business. It just suited the bill at that time. We wanted to be part of a large organisation with more critical mass. It took a long time to complete the process - over five months - but it was all very amicable and went through very smoothly in the end."

The Beddis business has not really changed since the acquisition but Beddis' role has; he is now responsible for the West Midlands region for Oval, which includes the 25 staff at Halkett Associates, as well as the 70 employees in Beddis' Barwick Street office.

About the rebrand to Oval, he says: "We don't have any hang-ups about that. I do not think we need to be concerned because people know who is running the business and who will deal with them. We have a much better story to tell with the Oval brand than we ever had with Beddis because it is a much bigger organisation."

Prior to setting up Beddis in 1985, he worked for 16 years at AJ Norcott, a commercial broker that was eventually bought by Aon. "I decided I could do what I was doing for them and do it for myself, which was the thing that really motivated me to form my own business."

He describes taking the initial decision to start the business and realising how many clients were keen to support them as one of the defining moments in his broking career. Beddis and two colleagues, Graham Hobbs and Richard Weston, set up Beddis after leaving AJ Norcott.

"The loyalty was fantastic from day one and that made us realise quite quickly that we had done the right thing. We also realised that the key to making the business a success was recruiting quality people. Over a 10-year period we recruited people from national broking houses and insurance companies and, as a result, we were able to attract some very good business and maintain our market share. We have traditionally lost very little business and we have quite a good reputation with new business too, simply because we quickly developed a reputation in the local financial services community with the lawyers and accountants and corporate finance people."

Beddis & Partners still receives a lot of new introductions from professionals working locally. And, despite now being part of a national group, Beddis insists Birmingham remains very important and is likely to continue to be so.

"Birmingham is a very prosperous and thriving commercial centre. There is a lot going on here in terms of redevelopment. From being the industrial heartland of the UK, it is now changing and, while there is still a lot of industry, there are also many service companies in the city as well. We have been involved with clients that have been part of those redevelopments too, so we have benefited from that."

The key as far as his business is concerned has been continuity and consistency. He says: "We like clients to feel settled with the team that is handling their business. We have always been keen on training and development and we have a very low staff turnover. The alternative to working here is to work for one of the national broking houses and people see working here as a more attractive proposition. Rather than us being part of just a firm in Birmingham, we are building a network of businesses and offices and people can now see a career path within this group."

However, even with the promise of career progression in a dynamic firm, finding good account brokers is still tough according to Beddis and it is disappointing, he says, that more is not being done to attract new talent into the market. However, he refuses to believe it is too late to address. "It needs more than someone saying we need to do something about it. This is where the Chartered Insurance Institute and the British Insurance Brokers' Association could get together and do something about it."

As a member of BIBA, Beddis & Partners does its bit for the cause by trying to recruit the best graduates and school leavers. However, the West Midlands Graduate Fair - although usually a good source of new recruits - was disappointing this year, according to Beddis.

"It's not very sexy but we try to sell our business to the applicant and get them as excited about it as we are. We have people who have been with us for a fair amount of time and have been trained and have a good background about the industry, but it is becoming more and more difficult to attract the people in the first place," he says.

Under Beddis' leadership, Oval has become one of the first companies to sign up in support of The Prince's Trust Insurance Leadership Group, which aims to raise £1m to help The Prince's Trust deliver projects that help disadvantaged young people to gain skills. This may not necessarily breed the next generation of brokers, but is a worthy new project for the group. "I have already had three colleagues volunteer to mentor underprivileged young people who will be starting up a business as part of this new initiative. It is particularly rewarding for me. It's terrific," he says.

Recalculations

In 2003, Beddis' anticipated premium income by 2006 was £50m. Its premium income is now £35m, which includes £4.75m of commission income. He says: "We were in a hard market then and premiums were rocketing. The market has completely changed. It is very soft now - in cases we were renewing 12 months ago we are seeing 30% to 40% reductions in costs there, which obviously impacts GWP.

"Our clients are well aware of what is going on. All we really do is the same as in a hard market - we warned people a long way ahead that they could see premium increases and now we are letting them know at the next renewal that they can expect things to be significantly better. Everything in life is about communications; as long as they do not have any surprises either way, I think that's a good message," he says.

One positive message for clients is Beddis' expanded product offering, courtesy of Oval. The group has a financial lines division, based in Leicester, which is strong in professional indemnity and also has a latent-defects team. Its acquisition of Lochain Patrick has given Beddis access to the Lloyd's market, which is expected to bring long-term benefits to the whole group. But the benefits are not all one-sided - Oval is benefiting from Beddis' ever-growing credit insurance expertise, which includes recent recruit Sharon Riettie who joined in August after working with Aon for 30 years.

As well as commercial, credit and commercial property, Beddis also has a thriving high-net-worth business. And although, as for many commercial brokers, it has typically been linked to commercial business, Beddis is keen to expand stand-alone policy sales to non-commercial clients. To that end, he recently recruited Rachel Gilliam to grow the business, and the team in Birmingham will be expanded to target new HNW clients.

Having access to Beddis' commercial property team was, he says, a bonus for Oval. "They are starting to do work for the rest of the group and are involved with huge projects for investment properties and portfolios for some very big local public limited companies. It is very successful for us. We have some local clients, but more than half the business is in London for commercial properties."

Beddis & Partners' business split is 25% commercial property and 75% commercial, of which about 10% is credit insurance. The latter will remain part of Beddis but its head of credit, Jonathan Smith, has been charged by Oval with developing a credit brand for the group.

Growth in commercial property will come from introductions within the Oval group and development work they are doing in trying to generate new leads. "The commercial property market is a small world and recommendations are quite commonplace. I cannot think of another team that has the respect our property team has. Mike Townsend who runs it is an absolutely top guy."

Risk management was part of both Oval's and the Beddis business mix before the acquisition and, increasingly, stand-alone advice on risk is being done by Beddis. "Oval has its own risk-management product and, as a consequence of that, we are starting to talk to large local clients about how it might improve their employers' liability programme. That is certainly another area we are trying to develop."

Where does he think the knowledge is lacking on that front? "Probably on non-conventional EL because it is still clear that the one that is still very volatile is liability. There is still a major issue on claims. That I think is volatile, so the larger clients are looking for ways that they can improve their EL record and reduce premium costs. It surprises me that risk management is being picked up so late in the day."

Sharing the costs

Beddis and all the Oval trading businesses pay a portion of group compliance team costs. Back in 2003, Beddis estimated that regulation would cost the firm between £50,000 and £70,000. In reality, the cost to date has been closer to £100,000.

"I was a bit out on that," he concedes. "And that was when we were already doing most of what was required. Most of the time was spent chasing the application. What the Financial Services Authority was trying to do was to cram everything into a very short space of time and it was a very long-winded process."

Does he hold out much hope for the brokers who were perhaps less prepared than the likes of Beddis? "I really feel that it is one thing having a successful application, and having the FSA accreditation was quite another. It is about being able to demonstrate over the long term that you are compliant and I think that is where the small firms will have problems and that is why I feel comfortable in an environment at Oval where we have that all nicely tied up."

He finds it disappointing that there are so few entrepreneurs coming into the market, but is not surprised so many are deterred. "If you wind back the clock 20 years, if you had this amount of legislation in your way you would not do it. It is almost impossible to do it unless you have an existing business behind you. There's just too much."

He continues: "If you look all around the UK you just don't hear about new businesses starting up. In the days when we set up the General Insurance Standards Council, it was something you could aspire to get registration from and it could be done in a relatively short space of time. With the FSA and other things in your way these days, it would be very tricky."

That said, Beddis is fairly happy so far with regulation, having had a successful visit recently from the FSA. "We are doing all that we believe we need to and have not come across any particular stumbling blocks. But, inevitably, there will be teething problems and it will probably take a couple of years to sort itself out."

Oval is unlikely to acquire any more Lloyd's brokers according to Beddis but good businesses in other regions are already on Oval's radar. "In Manchester, the North-west and Scotland, the South-west and Wales, we do not have any representation at present."

Beddis - along with the four regional managing directors - sits on the group's Insurance Broking Board and gets involved in local acquisitions. "I try to identify brokers locally that might be interested, but they have to be the right fit. Oval isn't an organisation that buys brokers for the sake of buying them. They have to be the right type of firm and it is very well researched."

This has been borne out with other recent acquisitions - all far larger targets than those acquired by Beddis itself in the past. He seems to be enjoying this aspect of his redefined role at Oval and has benefited from the exchange of ideas with his new colleagues. "It is very exciting. Being part of a bigger business and working with these people has been a real challenge. I have had an involvement in helping firms that are potential acquisitions understand what is involved. I have also spoken to one or two that we did not acquire."

Beddis enthuses about the outcome of his own acquisition by Oval but what has he found to be the biggest fear of a company being approached by an acquirer? "Loss of identity and the potential that it would be interfered with was a concern, but that is definitely not the case. If their businesses are successful and profitable - and that's the only type Oval will buy - there is no way we will come in and make wholesale changes that will have an adverse effect on the day-to-day running of the business. We don't try to fix things that are not broken."

CV

2004 joins board of new parent, Oval

1985 set up Beddis & Partners

1969 AJ Norcott & Partners.