Love and Knox - Nothing ventured, nothing gained

Within minutes of arriving in Swansea, Stuart Love and John Knox take me by car to the Millennium Bridge and marina; an aspirational backdrop for two brokers with the future on their minds. Surrounded by shiny new flats and building sites for luxury apartments, it is hard not to be reminded during the interview of the rapid and almost fatal expansion of the nation's house builders over the last three years and what a wave of expansion we have all been riding. Now the rest of the economy is starting to feel the squeeze and, as a broker, there are two ways to react: bury your head in the sand and pray that the worst will not happen or come out fighting to turn it to your advantage.

Commenting on the economic climate, Knox, chairman of Antur and chief executive of Andrew James Knox, recognises the challenges but is ready to fight: "Nobody is immune (from the economic downturn). We are pushing to get our sales force out there; training the younger ones, making phone calls and honing our databases. We are proactive."

Broking has been going through an acquisition boom funded primarily by cheap debt that has now seemingly dried up as the US economy lurches from one crisis to another and the Libor remains stubbornly higher than the Bank of England base rate. Despite rising inflation, some analysts are predicting a reduction in interest rates early next year, although given that the situation is changing day by day, this could be a forlorn hope. Meanwhile, Antur is hoping to capitalise on any acquisition slowdown and offer an alternative to the traditional acquirer with its local footprint in South Wales and belief that its market knowledge will be an attractive proposition for potential small-to-medium sized broker sellers. Wales has seen the growth of the independent, the rise of the consolidator and now, in Antur, the birth of what could be described as the anti-consolidator.

Love, managing director of Antur, believes that insurers are now reacting to consolidators' jumbo-sized commissions. Love says that insurers are forming a new mindset when it comes to how they perceive business wins through brokers: "We think there is a change in insurers' attitudes. Before, they wanted volume but now the message is high quality and claims experience; that is the message that came out loud and clear from a recent seminar with a large insurer. They are paying huge commissions to the consolidators but the claims experience is no different, so where are (the insurers) making a better return?" This comment has been backed up by recent statements from senior insurer executives claiming that commissions may need to come down and that the balance of power has shifted too far from insurer to consolidator, although many in the market are still waiting for evidence to back up these words.

Purpose

As with the majority of broking groups, Antur was set up to harness the buying power of a consortium of Welsh independent brokers. Originally, Antur was a holding company to acquire brokers but one that had no ultimate control over them. Now, founder Knox is consolidating the businesses with an aim of their becoming one unit. Explaining the reasons for starting Antur at the turn of the decade, Knox says: "We set up the acquisition vehicle to deal with the politics of broking; it is a very insular market and brokers never talked to each other. We looked at Westinsure's model and Bob Parkins (former Westinsure managing director) was very helpful. Since 2001, we have acquired over a dozen companies, all with our own resources." The companies were run as individual entities but were able to harness their buying power and win support from insurers. Gary Stephens was cherry-picked from Allianz to run the company.

The founding members were: Swansea-based Andrew James Knox; Llanelli-based Davies Craddock, which is set to join the combined group formally within the next 18 months; Harverfordwest Hedley Davies, which joined the new share structure in March; and Neath-based Richard Keen, which left Antur in 2006. Altogether, including three associate members based in St. Clares, Carmarthen and Pembroke, the group controls over £20m gross written premium. As one of Knox's fellow directors said, the group is now "at the end of the beginning" of what it wants to achieve.

As brokers such as Protectagroup, Hedges and Rose, the insurance broking division of Culver and D S Howell sell to the likes of Giles, Jelf and Cullum Capital Ventures, Love and Knox are determined to give other Welsh brokers an alternative. Regional consolidation appears only just to be starting, with Giles ramping up its Welsh acquisition drive in June through the purchase of Hancock GI Services in Newport, followed by that of Tom-Pentre-based Paul Murphy.

Backing

Insurers have contributed to the hardships of small to medium-sized independent brokers by continuing their policies of moving out of local areas and this has been noticeable in the regions. Knox continues: "Brokers are being pushed off to Bolton (Axa's centralised small broker centre) and those at the bottom of the food chain are not being looked after or joining the likes of the Broker Network. We have an opportunity to provide them with support."

Although all deals have been self-financed so far, Love and Knox do not rule out raising further capital. Knox says that he knows his company's potential, while Love adds: "If there were a great opportunity out there then we would look at raising money. However, we think there is a window of about two years until there will be a fall-out (from the consolidators). If you borrow money and throw it at somebody, unless the culture is right, you are just going to run into a load of trouble." Expanding on this theme, Love continues: "Brokers don't like being told what to do in Wales and they value their independence. Their characteristics would be to push against directives from London or outside the area."

Knox feels that succession planning has been a big weakness of brokers and he is now coming to terms with handing over his own majority shareholding in Antur: "I will retire in a few years and the big challenge is to move the shares in the other direction." When Llanelli-based Davis Craddock joins, it will take an 18% stake. The group's structure is about to be shaken up even further - Love says that the pair are investigating the possibility of a share scheme for staff.

Experience

Antur brought in Love last November to help reach the next stage of its development. A man with a vast pool of broking experience, he was the managing director at Caerphilly-based Thomas, Carroll for 15 years and, more recently, he has also worked with the board at Perkins Slade, which he describes as "world class". Love headed up the sports division at Perkins Slade and says that he was extremely impressed with the outfit where former Aon chief executive Ron Forrest is soon to return as the company's independent non-executive director.

Explaining further how the group hopes to pull together its brokers, Knox says: "We are calling this the 'Antur-as-one project' and are looking for best-of-breed. We have centralised accounts, installed a joined-up telephone system and are looking to get one IT platform. We need the economies of scale and don't want personal fiefdoms. We recruited a very good claims manager from NIG, Howard Philips, to head up claims."

Despite being based in Swansea, the brokers are reluctant to call Wales' second city its head office and emphasise that they want to be visible in the community to make sure that their presence is seen as local. Antur operates in seven offices already, with Love and Knox keen to spend time away from their Swansea office. A small acquisition in Cardiff has given the group a platform that boasts plenty of office space to add new recruits.

Knox is keen to talk about the client retention rate of one of its recent acquisitions, Fishguard; with a stunning 96.3%, he enthuses: "We look after clients. There is not much wastage." The client philosophy is clear. Love says that establishing close relationships with Welsh businesses is paramount: "They want to come and touch you, see you face to face or speak over the telephone. One of our offices is purely Welsh-speaking and we have our website in both Welsh and English." This dedication to a strong national identity is reflected in the group's name - Antur is the Welsh word for venture - however, this has not been extended to policy documentation.

Showing the local nature of the firm's ambitions, north Wales is not an area that Knox is looking to expand into and he jokes that it is quicker to travel to London and back than visit their northerly countrymen. Love says: "We believe there is around £150m of available GWP in South-east Wales alone. Our specialist area is small to medium enterprises, for example, steel works contractors. We are not looking to go beyond traditional general insurance unless we can be brilliant at it." There is an approximate 70% commercial to 30% personal split, with some gross premiums climbing to £300,000. Love is looking to expand further into mid-sized businesses. Despite the rise of the aggregators, Antur has also to pick up more personal clients, an area in which Love believes many customers return to high-street brokers following poor claims experiences at large insurers. Love remarks: "Clients appreciate there is a premium to be paid for service."

As with many brokers, Antur is honing its technology with an online travel offering and building its small-to-medium potential, which again hints the advantages of economies of sale.

The broking community is entering a new era of professionalism and brokers that have joined Antur believe that it is best to have some scale to compete in rapidly changing times. Although Knox and Love are going to have their work cut out over the coming months and years, Antur has two passionate leaders who will fight tooth and nail against the consolidators in Wales.

Stuart Love

Stuart Love is a 48-year-old father of two daughters and, between September 1991 and August 2006, was the managing director of Thomas, Carroll Brokers in Cardiff. Love has also been the British Insurance Brokers' Association chairman for South Wales for three years and has 27 years' industry experience. He was also a member of the National Advisory Group for Axa. Love obtained a professional diploma in management at the Open University in 2000 and completed Chartered Institute of Insurance diploma in insurance in May 2005.

Love is now settling into his role at Antur, which has offices in Carmarthen, Ammanford, Cardigan, Swansea, Fishguard, Haverfordwest, Church Village and Cardiff. The firm's website claims that Antur is "the local answer to your insurance needs whether for your car, home, travel, office, farm, pet, boat or musical instrument."