Neil Walton - Fast learner

Arguably, many insurance broker managers know insurance broking inside out but have been slow to learn the art of management. Neil Walton, chief executive at Centor, had a baptism of fire after learning that his employers were about to go bust and that he needed to turn round a business plan and a large injection of cash in just four days.

Formerly known as Christchurch Insurance Brokers, crunch time came in June 1998 when Walton teamed up with David Stratton, currently the non-executive chairman, and an insurer - which supplied the majority of the capital - to work "seven days a week" to turn the business around. Walton says: "I learnt a lot in four days. I didn't sleep and we didn't have a day off in six months. Every other broker wanted to attack our business and we learned how to fight. It took us a year to get ourselves sorted."

He continues: "We decided to tell everybody in the business everything and had regular Friday meetings with all the staff. We still have monthly staff meetings. A year later, we changed our name to Centor (Centor Insurance & Risk Management)."

An independent financial advisers and claims management company which inspected almost every motor vehicle and depot in the country was started and sold. The claims management company was innovative and managed to implement key savings for automotive manufacturers: despite it being a success he was not happy with the culture of the trade and was happy to sell up in May 2004.

Walton then performed his second management buy-out in six years when David Stratton, the non-executive director who owned 52% of the business, wanted to sell up. Walton insists he had a good relationship with Stratton but that he wanted to go into semi-retirement. This time, Walton surrounded himself with professional advisers and then carried out a second MBO, on which he comments: "I was confident that I could do it; I'm an out and out UK retailer broker. I found a management consultant, O'Byrne & Kennedy, and some corporate lawyers."

Walton completed the deal in a little longer than the four days that the first MBO took and now owns 80% of Centor (see our Focus in April for more on MBOs). The remaining 20% is owned by Paul Field, the systems and quality director who looks after claims, compliance and IT. Within the next 18 months, any outstanding money owed to Stratton will have been paid off.

The broker's 2,000 clients sit in five operating divisions within Centor, covering construction, commercial, private clients, property owners and super yachts. There are the usual suspects at the top of the relationship tree, with Axa, Norwich Union, Zurich, Royal and SunAlliance and Chubb providing the key relationships, though overall the broker uses more than 100 agencies.

Stratton wrote the yacht-by-design wording in 1995 for Independent Insurance, on which Walton remarks: "All of the firm's competitors have worked here at some stage; we were the lead in superyachts." Walton describes Paul Miller at Talbot Underwriting as the "font of all knowledge" in superyacht underwriting and he is now Centor's key contact in this area.

Commenting on his own role, Walton explains: "I have two roles in this business. In addition to making all key decisions, I am the 'gin and tonic brigade' with key clients and insurers at the top level, such as Janice Deakin and John Kitson at Norwich Union. We punch above our weight; I have access to all markets at a senior level because of our size and location (near the City)."

Walton is especially pleased with the progress that the corporate risk team has made since joining from Aon in 2006. In addition, Centor hired a team of four that came on board from RK Harrisson the previous year, together generating £6m of gross written premium (Centor has a total of £23m GWP). Targeting fees of between £7,500 and £20,000, the corporate team can place business for international firms based in the UK. Walton says: "We use local Centor-sized brokers that insurers introduce us to. We may do a programme with Chubb and Ace and ask to see a broker in San Francisco; they (would) give us a selection from which we pick."

Commenting on the broker's client reach, Walton is open to offers: "If it is possible and falls within our strategy map then we will write it. Our two fast-growing areas are property owners and construction. There are few construction brokers with expertise."

Centor is also determined to keep close to its customers by handling its claims: "We have a great claims team and we want to provide our clients with stunning claims service: why else are we here? We receive a list of claims' compliments every month; it has to be something a little bit special. Insurers are going back to delegated claims authority, which speeds things up. The £1m fire claim gets settled really quickly but the £500 malicious damage takes six weeks. With delegated claims it is cheque by return and it gets done. We try to think how we can be different. We prefer to do it, as the claims service of the big insurers such as Axa and Norwich Union is very poor in terms of worldwide service standards."

One of the main challenges for brokers is how to move from being an account handler to a manager that is responsible for everything the company does. Walton has reflected on this and believes he has taken his own learning to the next level: "I am a very humble insurance broker who understands insurance but I am not the cleverest businessman. I think that is a problem with a lot of brokers; not many are good businessmen. Using O'Byrne and Kennedy (which attends every board meeting) has allowed us to stand back and strategise."

Isolation

Some insurance broker managers confess to being lonely at the top and Walton hints at this when he says: "As a manager, who do I talk to? Luckily I have a mentoring session with my consultant, Paul Kennedy: he recommended a Masters of Business Administration and all of the board has taken it." At this point, Walton produces a strategy map, something that he admits to not drawing up before meeting his management consultants in 2004. He says: "We lock ourselves in a room every two years and revise it. We beat our last one by a year."

As with every broker, the staff is key. Walton spares no expense in keeping employees happy and trained sufficiently: "Our training budget is huge and we have been accredited as Investors in People three times in the last nine years. If you have happy staff then you have happy clients. My main job in life is keeping my staff members happy and being the conduit for their performance and growth." Walton adds: "It is about employing the right attitude. I can train most staff to do any role within reason but we are becoming tough on interviewing and our inductions. When recruiting we use word of mouth and sometimes go hunting for people. We don't use headhunters but rather tend to hire from larger brokers, as smaller brokers tend to reward their employees better."

Walton is cautious but optimistic in his approach to growing his firm's numbers: "We are not looking to set the world alight. If the right teams come along then we could do very well. My interest is in the right people; there are a lot of people that want to leave their current roles. These people are entrepreneurial to an extent but they don't know how to set up on their own; they are a little bit frightened. We give people their own budgets and staff, pre-agreeing costs and management charges at the beginning of the year. Unlike at some national brokers, there are no hidden head office costs at the end of the year."

Walton is particularly enthusiastic on some of the significant bonuses written into the budget: "There is one prolific business producer who we gave an Aston Martin. He is head and shoulders above the rest but we look after everybody. Despite trying to handcuff as many staff as possible, the big consolidators will come a cropper at some stage. I think Centor will do well because we give flexibility."

Walton continues: "We are open on our deals and can budget for a bonus and a profit. We haven't taken a dividend out of this business in seven years (although 40% of this goes towards paying for the MBO): we plough the rest back. We have great service awards: if you stay 10 years with us you get a £2,000 watch, while a 20-year reward coming up is equivalent to a £5,000 holiday. We have been very successful at hiring teams and I give a lot of people freedom, although we watch carefully when we sit back. The statistical information we produce is huge. We check everything and our bank managers tell us that we have a board pack as good as any public limited company."

The aim is for net turnover of £4m by 30 September 2009. By September, growth is projected to have climbed 62% from 2004 to 2008, with pre-tax profit climbing to over £0.5m. One broker was acquired in 2001 and Walton is in talks with another small broker that will move into Centor's building should the deal go through. However, Walton is not interested in any grand consolidation plans; he will buy small, strategic brokers but would rather take teams. He says: "I have an excellent relationship with my bank, though 2007 was a struggle in terms of growing revenue. The commercial income has gone backwards over the last three years yet our retention rate is still 98%. It is horrific out there but it is turning."

Walton is only too aware as a medium-sized independent broker of why the consolidators are so eager to buy his business. Referring to Peter Blanc, managing director of FMW Risk Services, which was sold to Oval recently with Blanc becoming regional managing director of its Eastern region, Walton insists that he has no interest in reporting to someone.

He jokes: "What does a regional managing director mean anyway? We are aware that the big consolidators are getting a lot more than us but we don't want to demand those levels. I could say to Norwich Union that 'I want x' but I don't. We have binders on property business with Axa, Allianz, Norwich Union and Zurich: we do all the work for them, however what goes around comes around sometimes and you don't achieve anything by demanding more and more. I believe that I can get better deals because I'm not taking out as much commission."

He concludes with a well-considered soundbite: "Independent brokers are the darlings of insurers."

Walton represents the new breed of broker manager. His objective is one of being a businessman that runs an insurance broker rather than an insurance professional running a broker. Walton has a refreshing perspective and it would be a great loss to insurance if his firm was to be bought too. Broking needs more people like Neil Walton.

FROM BROKER TO OWNER MANAGER

A keen sailor in his spare time, Neil Walton, 40, started his career at Lloyd's broker Frizzell in its construction department as a junior claims broker, joining Hanover Insurance Brokers as an account manager in 1984. Despite rapid growth and large clients the company lost direction and, in 1992, Walton joined Christchurch Insurance Brokers to run its commercial division. Christchurch then bought Hanover, which doubled its income, although court proceedings followed against the former directors, with Christchurch winning the case at the High Court of Appeal. Christchurch then acquired JD Ward Insurance Brokers. In 1996 Walton was put in charge of commercial, property, small business and private clients teams and by 1998 he had performed a management buyout of the UK retail section, forming Christchurch Insurance Services which was in turn re-branded as Centor Insurance a year later. Walton completed another management buyout of the company in 2004 that went on to exceed £3m net brokerage by September 2007. Centor Insurance & Risk Management sits within the top 40 independent brokers and has ambitions to break into the top 20 by 2010 through organic growth and small acquisitions.