Taking liberties with insurance

Tom McIlduff was tasked with bringing the insurance company back to life. Now he is ready to move on

To appreciate the extent of Seán Quinn’s ambitions, take the lift to the top of the tower in Blanchardstown, Co Dublin, from where he ran his insurance empire.

Ten storeys up, the views are almost as spectacular as the scale of the accommodation. Half of the floor space is given over to a gargantuan boardroom and anteroom. The epic proportions, corporate decor and panoramic vistas are hard to reconcile with Quinn’s expressed preference for the simple pleasures of rural life.

The hubris did not end in Blanchardstown when Quinn was ousted in 2010. Liberty Mutual, a Boston-based insurer, also had grand plans when it bought Quinn Insurance out of administration the following year.

“The goal was to become a top three player,” explains Tom McIlduff, chief executive for the past two years. “The plan was to expand in Northern Ireland and Great Britain, to grow geographically as well as within existing product lines.”

It didn’t work out that way. Under McIlduff’s tenure, the focus has been on retrenchment. Liberty has abandoned the UK and stopped underwriting car insurance, its core product, in Northern Ireland.

In the Republic, it has shrunk to a lowly eighth position in terms of market share. The workforce has been pruned from 1,500 to fewer than 400. The top floors of the Blanchardstown tower, including Quinn’s penthouse suite, have been vacated and are available to rent.

McIlduff is also clearing out his office, a humble affair on the first floor. He moves to Madrid at the end of the month to take charge of Liberty’s operations in Spain. It is a much more substantial business, with a premium income almost four times the size of the $222m (€208m) that Liberty generated in Ireland last year.

Ideally he would have liked another 18 months to complete the transformation of the Irish business, but that task will fall to his successor, Sharon O’Brien, currently chief operating officer.

“The rest of the journey would have been about getting the business back to a sustainable level of profitability, where we’re achieving the return on equity the group sets for us,” he says. “That will be for Sharon to do.”

Spain will be a brave move for McIlduff and his young family. “When opportunities come up, you have to consider them and whether they’re the right thing for you and the family,” he said. “They will join me in August, which I gather is a very bad time of year to move to Madrid because of the heat. Unfortunately, we have to be there before the next school year begins.”

Travelling for work is second nature for McIlduff, who has been commuting to Blanchardstown from the family home just outside Belfast. “I spent an hour and a half in the car this morning driving down from Belfast listening to a Spanish audiobook. It wasn’t a language I learnt growing up.”

Brexit might have made the journey even longer if he was staying in Ireland. “I worried for a while about a hard border but that’s not my problem any more.”

Madrid will be the latest staging post in a career that began as an engineer in the oil industry before progressing to consultancy and financial services, including a stint as chief operating officer at Bank of Ireland in the UK.

When he joined Liberty at the start of 2015, the business was losing money and there was a real possibility his job could have been to close it down. “It was in a fairly challenged space,” he said. “It’s fair to say we considered every option within the first couple of months.

“It was really important that we figured out a way to survive. To do that we had to make some difficult choices.”

The pain of walking away from the €300m that Liberty had ploughed into Ireland was not the only reason it decided to stay. “There’s a strong link between the US and the Irish business,” according to McIlduff. “A lot of people in Boston believe they’re Irish.”

It still took a long time to grasp the nettle, especially when it was obvious there was not enough work for all of the 1,500 employees inherited from Quinn. “The problem was they were trying to grow while the market was shrinking,” he said. “They didn’t reduce the head count because the plan was to grow our way out of trouble.”

McIlduff did not subscribe to the strategy. “There’s a virtuous circle in insurance,” he said. “If you can get your costs down, you can reduce your price a little. If you reduce your price, you sell more. So by getting your costs down, you sell a bit more.”

If you’re going in the opposite direction, he added, “ it’s very difficult”.

The restructuring was not all about cutting costs. “At the same time as we were reducing the head count, we were investing in the number of people in the actuarial team,” he said. “We needed a better, more sophisticated pricing model, and we needed better analytics around reserves.”

Following the retrenchment, motor insurance now accounts for 65%-70% of the business, with the remainder divided equally between household cover and commercial lines. The latter has been rationalised to concentrate only on large risks, where premiums typically exceed €10,000 a year, and in sectors such as construction, where the business believes it has expertise.

Having lost money consistently since Liberty took over, the business is on course for “a small profit” this year. It has finally moved back to expansion mode, although McIlduff is keen to stress growth will not be at any cost. “Top three is not the strategy any more. We want a long-term sustainable business. We have taken very aggressive action to try to drag the business forward.”

A return to the British market is not part of the plan. “It’s not a market you can be in unless you’re fully focused and concentrated there.”

A continued presence in Cavan, the birthplace of Quinn Insurance, is firmly on the agenda. Following our interview, McIlduff planned to pick up his Brazilian boss Pablo Barahona, Liberty’s chief operating officer for continental Europe and Latin America, from a flight from Sao Paulo and take him on an inspection tour of the Cavan facility, where about 40% of Liberty’s remaining workforce are employed.

While his peers gripe about a dysfunctional motor insurance market, with soaring claims and high legal costs, McIlduff prefers not to blame others for the industry’s woes.

He supports government plans to improve road safety and reduce the number of fraudulent applications and claims. However, he also supports a measure the industry has generally resisted — more information-sharing — claiming data about claims and reserving practices is patchier in Ireland than in emerging markets such as Turkey.

“Better transparency would help people make better decisions and avoid some of the really large swings that you have in the Irish insurance business,” he said. “Insurance gets into trouble when you don’t understand what’s happening in the market. A previous boss used to warn that you’ve got to be constantly paranoid you’ve got something wrong.”

With only 6.1% of the market, it is hardly surprising that Liberty would like to be given a peek at its larger rivals’ figures. McIlduff insists, however, that sharing information does not mean parting with commercially sensitive data. “It’s not about giving out information that allows you to replicate your competitors’ operating models. That’s not possible.”

It might not want to simply copy its rivals’ operating models but, unless Liberty can begin to emulate them in other ways, it is difficult to see how the company could be satisfied with such a tiny share of such a tiny market. That will be the big challenge O’Brien faces when she takes over the reins.

The life of Tom McIlduff

Vital statistics

Age: 43
Home: Holywood, Co Down
Family: Wife and three sons, 13, 11 and 7
Education: Chemical engineering, Queen’s University Belfast
Favourite book: Clear and Present Danger by Tom Clancy
Favourite film: The Godfather

Working day

I’m usually up just after 5am and get to the office in Blanchardstown at around 7am. Between 7.30am and 9am I try to do some work. Then it’s time to meet our teams and for one-to-one meetings with managers who report to me. A big part of my job is to try to engage staff. I finish work at about 7pm and if I’m spending the night in Dublin I usually head straight to the gym. I try to leave weekends free for family.

Downtime

I coach at Holywood rugby club on Saturday mornings. I used to play golf but when you’re away from home so much during the week, it’s difficult to disappear for five or six hours at the weekend. I feel I’ve one more rugby season left in me — if only I could get fit.

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