As bold as Bollington

Stephen Wall and Paul Moors are the respective heart and soul of Bollington and more than live up all the positive northern stereotypes involving salt, earth, beer, hard graft and laughs.

This alone would be enough to cement their status as characters of note in the broking world but another trick they have polished is managing to pick up accolades and awards on an almost yearly basis. Having searched out and created niche areas in the care, charity and motor trade sectors, Bollington's gross written premium has increased five-fold in the past three years. In 2006, having been completely dormant on the acquisition front during this frantic period of organic growth, Bollington acquired three firms, the most significant of which was Oxfordshire-based FM Green.

However, Wall and Moors are not about to be carried away with the zeitgeist and go acquisition crazy. Wall explains: "Our target is to treble in size in the next three years - 50% by organic growth and 50% by acquisition. If we grow organically there's less wastage in terms of personnel, clients and insurers. You can't just go and buy companies because people that own them want to sell them. We're not as financially sophisticated as some of the major consolidators. We are driven by the prospect of acquiring new clients and see acquisitions as a stretgic move to help us achieve that."

Moors adds: "For us acquisitions are about gaining new clients and growing the business in terms of GWP rather than a financial model to respond to our investors or shareholders."

Equal stakes

Bollington is privately owned and funded by four people, each with equal stake. Joe Wall, Stephen's father, and Tony Wooley - one of the original partners - who is currently on an earn-out deal. So, from 2008 the company will be wholly owned by the three remaining stakeholders.

Moors says: "The structure at the moment is Stephen is chief executive, I'm chairman and Joe Wall is financial director. We also have a managing director, Andrew Rodgers, who's joined as part of the FM Green arrangement. He was MD of FM Green, we've also got an operations director called Phil Jones. Ian Ritchens is a non-executive director with responsibly for affinities and trade associations."

Wall also states that Bollington is privately funded and has a debt facility with one bank but that "we have by no means used our debt potential and there are no VCs or outside investors - it's just us."

Moors continues: "All of our options evolve around us remaining masters of our own destiny, to make our own choices. Because at every point there are choices to be made about how we go forward, and part of the board'*s remit is to constantly review the strategy for investment."

In terms of Bollington's geographic spread it is now national, with an office network headquartered out of Manchester for broking and underwriting - with offices throughout the UK and field operatives ranging from Scotland to Exeter. Wall adds: "We wouldn't want to call ourselves a national broker because that has certain connotations but we do have nationwide coverage."

Wall also firms up on something hinted at earlier in 2006, which is the desire to move beyond the UK. "In 2007, Bollington will expand into the Euro*p*ean market. We already have facilities available in Europe and may have our own people, so we wouldn't necessarily offer this just through associations with other brokers. That said, associations are an option as well." Wall also says the rationale behind the move is driven by the desire to cater for expanding corporate clients but also, as he explains: "Because there are certain European markets that have the same entrepreneurial, owner managed small to medium-sized enterprise bases that we have in the UK and we see opportunities in these parallels."

This leap will be taken during the year Bollington beds down its recent acquisitions and also focuses on domestic growth. So what will that involve? "Bollington aims to establish more bespoke affinity schemes and trade sector branding. We're already the appointed broker in the motor trade market for Avro and Unipart and, in the children's care sector, the Independent Children's Home Association. So we will be developing the provision of affinity services where our brand is strong. However, we're also interested in moving into new trade areas and we're becoming more involved in technology."

Both Wall and Moors are keen to stress that the acquisition of FM Green is a strategic one, as apposed to being a decent scalp for a hungry consolidator. Moors explains: "FM Green's broker connections will provide vital intelligence on what retail brokers are struggling to place, or where there is a genuine lack of capacity, enabling Bollington to design bespoke solutions." By this Moors outlines the enhancement of approach by Bollington of finding areas it can specialise in as core niches.

He continues: "One of the areas, where we grew and did well, was because it was an area where many brokers couldn't obtain cover for their clients. So, by using FM Green and their wholesale accounts, we'll be able to find areas where the local brokers can't get cover or if there's capacity issues or other problems we will then do what we're good at, which is securing markets and writing bespoke products for that particular industry by using our in-house facilities, plus our insurer and Lloyd's connections. This could be in the care sector but other sectors as well."

So, armed with a genuine innovator like Ian Richens, will the design and production of policies and products see Bollington edge towards the virtual insurer model?

Wall gives an emphatic "No" adding: "Our strategy involves having an underwriting panel for our various divisions, perhaps what hasn't been made clear is the way we operate those different divisions. We have a personal lines division, motor trade, we also have Your Business Insurance which is small high volume commercial products, a commercial division and a care division which includes charity. Each division has its own insurer strategy, which means we now run a virtual underwriting centre - so we're not a virtual insurer, we don't provide capacity we have delegated authority in all our sectors and this is backed up by a number of onsite underwriters, which have high level authority clearance for large business. We also have facilities with a number of Lloyd's insurers and binding authority in addition to that."

He elaborates further: "The reason why we are not becoming a virtual insurer, and the reason why I said no so quickly, is because most of the business will come from our own areas such as our own companies, clients and initiatives and we also have facilities in specific areas available via wholesale, which we will develop in 2007."

New wholesale division

Moors interjects that Bollington also plans to set up a new wholesale division in 2007, which will be branded FM Green. This will provide bespoke and boutique-style products in specific areas for retail brokers.

Wall qualifies this by adding: "What we're not going to do is place advertisements in the back of trade magazines inviting any old business. What we will do is identify problematic areas and fulfill those requirements. We don't want to be the new standard property owners market - by that I mean we don't want to be in a market where there is already option saturation and we have to compete on price."

Wall also says that, in addition to FM Green enhancing Bollinton's methods, it will in return enhance FM Green's wholesale operation by adding its niche and marketing know-how. Wall explains: "There will be a separate office based in Whitney dedicated to wholesale development with separate staff and company structure to avoid conflicts of interest."

Moors adds: "The Bollington philosophy has always been we don't do standard business. We try and do things slightly differently and we view going the wholesale route as being much the same."

So will all business eventually be placed through Bollington's in-house facilities?

Wall: "We've got a strategy that segments our specialist business, and the insurers that are not in our specialist panel know they're not, and on our core commercial business we've selected an unnamed panel to deal with 100% of business up to £25,000."

Moors explains further: "So unless it's a specialist risk it should be placed via our underwriting centre for anything up to that amount. Anything above that will be broked in the traditional way."
So why the £25,000 ceiling - is that the limit on your delegated authority? Moors responds: "We made a commercial decision that we feel that risks below that are more controllable. Beyond that level risks start becoming more diverse so we have set that limit to indicate the sort of business we will be placing on the panel. So general SME business is getting placed on the panel but anything a bit quirky or larger and requires bespoke treatment will be referred to the open market facility."

Wall also states that Bollington does not want to be niche only, as it is by accepting a spectrum of general business that niche opportunities become evident. Moors also says this process also involves creating niches instead of just following set ideas of what a niche is.

Moors gives a current example of the process of locating niches: "One of the areas emerging for us at the moment is the requirement for small care and charity business to be transacted in a different way. Most brokers would be looking to account manage that type of business but we're looking to do it on a more product-driven basis. And the product can be bought via the internet, through direct marketing or other methods that wouldn't be the normal way."

However Wall insists this is not about stripping out cost: "It's about providing the service that's required. So our entire portfolio is given the option to transact and manage the business by the telephone, the internet or by face to face."

Moors adds to that: "We want to allow our clients to buy how they want to buy and not how we want to sell. Most insurance brokers have a distribution strategy that their clients have to follow, we're looking to follow the distribution needs of our clients."

So does inventing niches involve applying the criteria that an underwriter has to fulfill to see areas of commonalty between different risks maybe across different sectors?

Wall: "That is an option and I take the point but the way we have worked in the past is by constantly asking the operators at the coal face what is a difficult risk to place. If we have to go the extra mile to place a certain trade, you can be sure the client has had difficulty finding a broker to place it. So that's why we have a team of people constantly working on behalf of the board to find any gaps in availability in the commercial general insurance market. Once gaps have been identified we begin developing a product to respond to the problem. We have the in-house expertise to be responsive and we can do that very quickly."

Fast response times

However, the problem Bollington is finding is that it is able to respond much faster than insurers, as Moors explains: "We will pick up on an issue in a given area but then we find that we are waiting for insurers to respond which can cause issues. So, one of the ideas behind the underwriting centre is we can respond, within our binding authorities, very quickly."

So it's not a return-on-capital arrangement?
Moors: "It's definitely not that, it's a trading relationship that exists to ensure that our clients can have the best possible service, the most appropriate cover at the most competitive premiums."

In terms of the potential of being able to plug FM Green straight into Lloyd's, Wall says this is difficult as it did not come with accreditation but the process of rectifying that was underway by the end of 2006. Bollington also has a stake in a firm call Incity which is umbrellared by a Lloyd's organisation which enables it to place business into Lloyd's with an enhanced level of control.

Moors says: "That is something we are looking to develop in a serious way in 2007 and we are currently reviewing our strategy for Lloyd's and the London market. FM Green already has a number of connections and London market binders, we've got our own and in putting the two together we'll be able to get the best of breed."

Wall also says: "FM Green is a well known and well respected brand within the industry, which we obviously want to take advantage of. We're likely to keep the brand for wholesale business and maybe one or two trade associations that are used to using that brand."

In terms of Ian Richens involvement and exit, Wall states that he is a non executive director of the Bollington group as a whole - not just FM Green. However, Wall is also keen to stress that "Ian is not there purely to secure any kind of FM Green earn-out. He's definitely an integral part of our development over the next two years."

Moors explains that the considerations when Bollington acquires tend to be slightly different to other brokers. "The FM Green acquisition is a genuinely strategic one for us and it is not just based around consolidating. Yes the GWP was important and the staff will also help us to augment our business. We are constantly looking for people that do what Ian Richens or his account executives do. So now we have Ian's expertise, a good management team and a good account executive team, all of which complement our business but also opens up areas we don't operate in at the moment."

Moors adds that FM Green was also complementary because it has field operatives in parts of the country Bollington does not. He continues: "And it's in sectors where we are already strong - they were one of our competitors with a good reputation and it was a great fit."

"Yes, hopefully in first half next year - brokers that specialise in motor trade and charity sectors and also regional brokers in the North."

Bollington is also looking to open offices in other parts of the UK and in January Bollington was due to open an office in Stoke on Trent. This is a commercial office specialising in technology business. Moors says: "We're also opening an office in Milton Keynes and Birmingham in the new year as well. This will be run by a mixture of staff from Bollington, FM Green staff and some new staff from outside."

As mentioned, the funds for acquisition are available on an 'as and when' basis through a debt facility with a bank, which does not involve releasing equity. Wall adds: "And we're not going to go into the methods we've used, as I think they're quite good!"

Wall also recently had a meeting with Martin McLachlan to discuss imarket; so is it something for Bollington? "I was very interested in what Martin had to say and while we understand the driving forces behind imarket we don't see us using is as a part of our strategic developments."

Is that because Bollington is too niche for imarket? Moors: "We need to be able to be flexible to write business in the way that we feel is most appropriate - from an efficiencies point of view but also from a provision of services point of view and imarket seems to be quite restrictive in terms of its delivery models."

Regarding the common criticism that the products available via imarket are also restrictive Moors responds: "We prefer our products to be more bespoke for our clients."

Wall adds: "To get to where we need to go our products need to be exclusive and bespoke. That's why we write our own products."

However, Wall does say: "There's a lot of brokers that would benefit from imarket and they have to work with insurers to make it happen. Just because imarket isn't a valid model for us doesn't mean it's an invalid proposition, it's just not for us. It's a question now of insurers and brokers making it happen."

As Professional Broking's Sentiment Surveys demonstrate quarterly, insurer service poses something of a challenge to brokers; is it an issue for a specialist like Bollington?

Moors; "There's an arrogance in the approach to many insurers distribution models as they don't take into account the way people want to buy."

In terms of whether insurers are improving, Moors says: "I think they listen more but I'm not sure the actions reflect what they hear. Some pay a lot of lip service, others are currently reinventing themselves but is that really to help the broker or is it to help them distribute? The answer to that is the reason why we want to underwrite ourselves. I personally think the broker should provide a genuinely value-added service, and one way they can do that is by making sure the product is more appropriate for their clients rather than a standard type of product."

So, is poor service costing insurers premium pounds for these reasons in addition to the rise in captives? Or at least there is an opt-out of the service aspect of what insurers offer?

Moors: "There are some insurers that have made a big effort in recent times to improve their service proposition and be more flexible in how they do things to gain that SME market. However, that flexibility may be to the detriment in resources for other areas."

Wall adds: "I would say Groupama, Norwich Union and St Paul have made a particular effort to increase their flexibility in how they distribute, particularly in the SME market as far as we're concerned."

Is that because Bollington is offering them something niche? Wall: "It is a double back-scratching exercise. And there is a high level of understanding of our niches at those firms, and from that we can get both get on with honing our services to clients."

In 2006, a number of brokers made grand statements about their longer terms aims; does Bollington have a masterplan? Moors: "There's no pressing urgency to decide any firm options for the future at the moment. We review all options constantly but we wouldn't rule out a floatation or AIM listing, perhaps a release of equity for investment. These are all options for the future but not at the moment."

With an irrepressible mischievousness beginning to poke through as the interview draws to a close, Wall and Moors revert to type as a double act. Moors says: "At the moment the most pressing thing is for me to buy a present for my Missus for Christmas, otherwise there won't be a future!"

Wall is quick to follow suit and, when asked what Bollington's underwriting results are like, he says: "F***ing brilliant, apart from the other bits which are sh*t!" He recovers his composure to make the concluding point, which is: "The last time we went on record to say how good they were - and which of our delegated authority markets were returning us profit share cheques everyone piled into those markets. There is still a lot of potential in our existing business model but it is a challenge because the opposition keep acquiring. We believe in three years time we will be a major independent force in commercial distribution providing services on both a retail and wholesale basis to corporate, commercial, SME and affinity clients."