The car insurance boss who wants to motor into new foreign markets

It is a case of ‘Recession? What recession?’ for motor insurance firm Admiral, which is in the middle of taking on 750 staff in the UK alone this year.

And that means an awful lot of meetings for the Cardiff-based firm’s 53-year-old chief executive Henry Engelhardt. The Chicago-born boss meets every one of his new hires personally, and as part of his induction gives them a single piece of a jigsaw.

“I do that because I want to illustrate that no individual on his own can complete a puzzle,” he says. “Only teamwork can give you the whole picture.”

Engelhardt, amiable and relaxed, is sitting in a sixth floor meeting room of his advisers Bank of America Merrill Lynch in the City in a blue short-sleeved shirt and casual pants.

It is fair to say that he is the heart and soul of the firm that has an eight per cent share of the car insurance market and a market valuation of £4bn.

He headed the team that wrote the business plan to form the company in 1991, and led it through both a management buyout in 1999 and its initial public offering in 2004.

He has seen the firm grow from a group of five people researching a business plan to become the only FTSE 100 company based in Wales, employing 3,800 staff, with units in Germany, Spain, Italy, and the US. The company also owns the price comparison website, Confused.com.

The business fared well during the financial crisis and its aftermath. In March it posted full year pre-tax profits up seven per cent to £215.8m on sales up 18 per cent to £1.08bn.

Around 95 per cent of the firm’s sales come from the UK. Its foreign units are all relatively new ventures of which Spain, which launched in 2006, is the oldest.

Engelhardt and his French wife Diane own 15 per cent of the business, which together with other investments puts their wealth at £572m.

Admiral has based its business around offering cheaper insurance to people who have in the past found that hard to get.

“In general our book is skewed towards the under 40s, bigger cars and cities – London and the southeast in particular,” he says.

“The amount of people buying our product has been quite stable over this period. No other product I know has the police riding around checking that you have bought it.”

To price policies the firm uses a range of factors such as age, vehicle type, driving history and postcode.

He adds: “We use a very complex rating structure from our own customer data, as well as using third party information. It is updated all the time.”

Engelhardt says that competitive pricing allied with keen cost control drives the firm’s profits. He says: “Our business is very sensitive to price. On a £600 purchase people will move if they can save £5. That leaves us very little margin for error. That’s why we need to keep costs down, because it feeds directly into our prices.”

The firm’s combined ratio – a key industry measure of claims and costs as a percentage of premiums – is 88 per cent on its UK business, and 89 per cent across the group. Many rivals in the sector have combined ratios of 90 per cent and above.

The car insurance boss adds that the price of policies across the industry have been depressed to retain customers during the downturn, but he says that over the next 12 months they look set to rise.

He adds: “Analysts think we will make more money in 2010 than in 2009. I am comfortable with that.”

Engelhardt says he is happy with the pace of the organic growth the firm is showing and has no plans for major acquisitions.

For this reason he says he is not keeping an especially close eye on rivals Direct Line and Churchill, which are both owned by the troubled Royal Bank of Scotland (and together account for 19 per cent of the car insurance market). The bank has said it plans to IPO the units before 2014. However, if conditions are not right analysts say a trade sale is possible.

But Engelhardt says: “We don’t think we will be able to buy either of these firms without a lengthy monopolies and mergers investigation. And even if this is passed we think if they are sold to us it will give us such a hefty share of the market, the sellers will make us pay a large premium for it. We think we can grow pretty rapidly on our own.”

Engelhardt points to the slew of foreign markets he has entered into over the last four years. He adds: “Spain was our first, it has an €8bn (£6.6bn) car insurance market and is the smallest foreign market we are in. There are a lot of opportunities out there.”

Even though Admiral worked its staff hard to quickly establish itself in a mature marketplace, Engelhardt believes it is important to enjoy your work.

Each month one of his departments is appointed the Ministry of Fun and has to think of a game for the rest of the office to play. In the past this has meant anything from table football competitions to egg roulette, where a mixture of boiled and raw eggs are cracked open on executives’ foreheads.

The Admiral boss says: “If people like what they do, they will do it better.”

Engelhardt is the son of a Chicago meat packing businessman, who took a degree in journalism at the University of Michigan. After that he drifted into a job as a runner on the Chicago Mercantile Exchange. But he did not stay there long, and then, at 29, he travelled to France and studied at the Paris business school Insead, where he met his wife before spending time in Asia.

He settled in the UK where he became a management consultant with SRI in Croydon in 1988, and later joined insurer Churchill as the business was beginning.

A few years later Engelhardt got a call from Lloyd’s of London agent Brockbank, which wanted to create a rival to Direct Line, which did not use brokers to sell insurance.

Engelhardt took up the challenge and worked on the business model for some time, before setting up in Cardiff after the local council gave the project a £1m grant. Admiral opened its doors with 57 staff in 1993.

In the mid-90s Brockbank changed hands twice, both times bought by Bermuda-based investment firms.

“We went further and further down the food chain,” says Engelhardt. This led to a management buyout backed by Barclays Private Equity in 1999.

Engelhardt was at the helm when the firm launched on the London Stock Exchange in 2004 floating at 275p, valuing the insurer at just over £700m. Today the firm trades at £15.10 and is valued at £4bn.

Before the IPO, Engelhardt and his management team had created an employees trust, so when the float took place some 1,400 workers shared a pot of £60m. Some became millionaires, with the average handout being £39,000.

“The day the firm floated, so many people got a share of what we had become. That was probably the best day of my working life,” says Engelhardt.

The Admiral boss is a big Chicago Cubs fan, and the second thing he does in the office in the morning, after checking the daily sales figures, is cast his eye over the baseball results.

It has not been good reading for him for some time.

He says: “We have gone through the longest period without winning a league title than, I think, any other major sports club anywhere in the world. This is our 102nd year without the title. It has been a bad century for us.”

The Cubs could do worse than push for Engelhardt as their next chief executive – he tends to get results.

CV | HENRY ENGELHARDT
Age: 53

Work: Runner at the Chicago Mercantile Exchange; Management consultant at SRI; joined car insurer Churchill as it was setting up; chief executive at Admiral since 1993.

Education: University of Michigan, read journalism; MBA from Insead business school.

Family: Married with four children.

Lives: Just outside Cardiff.

Hobbies: He and his wife work with a number of charities, follows the Welsh rugby union team and the Chicago Cubs baseball team.