Interview - Ash Bathia: building the profitability platform

As QBE Europe's chief underwriting officer of property, casualty and motor Ash Bathia runs through the firm's strategy and plans for the future, it would be easy to be thrown off by his enthusiastic embrace of management jargon.

But while his straight-faced recital of a list of abstract nouns that he says sum up the PCM business's "DNA" and frequent use of metaphor in describing QBE's "journey" can go a bit far, it is nonetheless true that, underneath it all, Mr Bathia has an interesting story to tell.

By the time he was 16 years old, he had lived in three continents; born in Uganda, his family moved to India when he was 10 where he lived for six years before they upped sticks for London. Although his strongest school subject was science, the need to "pay the bills" meant rather than pursue his dream of studying genetic engineering, he left school and, aged 19, took a job with Eagle Star in Chelmsford, Essex — attracted by the fact that in the late 1970s, the company offered day release for study.

Team building
From "chief coffee boy and filing clerk" Mr Bathia spent three years working at the small personal lines office before being offered a job in Eagle Star's City office — he joined the liability division in 1981 following a three-month training course.

"Arriving in the UK, starting school and learning the language was quite a challenge but then my real break came when I joined the international side of Eagle Star's UK business in 1988," he recalls.

Here he was exposed to the firm's portfolio of international business including reinsurance. He sees his childhood exposure to different cultures, during which time he learned how to quickly adapt, along with his involvement in both the retail and international sides of the Eagle Star business, as providing the foundations to his career.

After 18 years at Eagle Star, Mr Bathia was headhunted by then general manager Bob Grant and, following an informal interview, he agreed to join QBE where he was given a "blank canvas" and invited to "paint my own picture" — in other words build up the firm's non-existant liability business.

"At that time QBE's European operation had fewer than 100 people and a £50m book of business. Bob told me 'we need a liability presence and think you're the man to do it'. After so many years with Eagle Star it was quite a wrench to leave but joining QBE was the best thing I ever did.

"We had a £1m book of liability business and one underwriter; now we have a £1bn business and quite a few underwriters so things have moved on," he laughs.

"That growth probably goes beyond what we imagined at the time. QBE has moved on phenomenally in those 14 years — we've seen the business grow from a very small Australia-centric company to a truly global organisation."

He recalls being thrown in at the deep end during his first week at QBE in March 1997 when he was sent to Dublin along with other senior people to a team-building conference. It was here that then operations director Frank O'Halloran, fresh from completing an MBA at Harvard, delivered his vision for the future of QBE: "He said he wanted to create an enduring culture within QBE, to open up the company and put integrity at the centre of it; to focus on the costumer, planning, entrepreneurship and business acumen. These were the qualities he wanted to enshrine and embed in the culture of QBE."

It is at moments like this that terrible, cynical thoughts towards business courses spring to mind but Mr Bathia is not in the least bit apologetic for the visionary rhetoric extolled by his firm. However, the principles that he says are dear to QBE are certainly among those that brokers bemoan as being so frequently lacking among insurers.

He describes QBE as having "an underwriting-driven culture that empowers our people" because "clients and brokers love dealing with people that can make decisions at the front end of the business".

He continues: "We have grown to a $15bn (£9bn) global organisation and we have maintained our ethos of empowerment. Too many organisations lose that when they become big and bureaucratic."

Six years ago the firm took steps to consolidate its Lloyd's and non-Lloyd's operations under Europe CEO Steven Burns while still retaining some brands. Then, three years ago, it further rationalised the business under a single brand. Mr Bathia's role in this was to integrate its five European casualty businesses, including its Lloyd's operation, under one umbrella.

This period was about "internalising the brand" he says, before the sponsorship of taxis and, of course, rugby came along.

The third part of the process took place last November and involved the integration of QBE's European property, casualty and motor businesses to create one of three business units — the other two being reinsurance and trade credit, and marine, energy and aviation. This development saw Mr Bathia move from joint managing director of QBE's casualty division to his current position and the departure of property MD Bernard Mageean.

"Now the structure is excellent but the journey never stops," he says. "We've reached our destination where we now need to park ourselves for a while before we move on."

Thankfully, Mr Bathia can explain what all this means: "The formula is to really use this platform to drive the PCM business from its current $2.7bn gross premium to a $5bn business by the end of 2015. And to ensure we still make the requisite profit.

"On 7 and 8 April we took 104 of our senior people away on an integration journey," he says. "We wanted to sum up our mission and vision and work out how the hell we get to $5bn and still make money."

Electric energy
The answer was to "set out the building blocks of success", he says, to identify the PCM division's values.

"We created an identity. The words I really want people to resonate with are 'integrity', which sits at centre of everything we do but also 'team', 'respect', 'pride' and 'support'. The other words I like are 'simplicity', 'passion' and all that sort of stuff. Words I don't like are 'politics' and 'silos'."

He describes how there was an electric energy in the room by the final sessions: within 48 hours, a room of people who were largely strangers had become the "leadership team that will drive the business".

"I have consistently used a very simple model around success. Make sure you employ the right people; empower them with responsibility and ownership and make sure they deliver. Then make sure you reward people in various ways: say thank you, financially, and the fact they are part of a really successful business and know they have made a difference to that business is the most important factor."

As part of a gap analysis, the PCM team has now "created more opportunities for us and we are going to take these forward".

It had already started looking for ways to ramp up the Canadian and Middle Eastern businesses and is now focused on a "whole host of things", he says. This has involved putting business support, including risk management and operations, at the forefront of the business. It has also seen the launch of a multinational product targeting UK firms that want to expand beyond these shores.

Turning to the UK, where QBE's regional network is made up of seven offices, Mr Bathia says the firm is properly positioned for when the market improves: "We have invested heavily but it's not the right point in the market cycle to ramp up the business, so we are positioning ourselves in the space for when the timing is right.

"Our regional underwriters have the same level of empowerment as those sitting in London. The normal model for big companies is that, during the soft market, local offices are given way beyond the normal of level of power and in a hard market this is all taken away. We make sure we employ the right people to make decisions so we don't start taking away power just because of market cycles."

As far as new offices are concerned nothing is planned in the short term, but he adds: "Looking at potential gaps in terms of our UK footprint, we have nothing along the M25 corridor, so that may be something we explore in future. We have a Bristol office but may look at opening one in Cardiff. North of Watford, I think we have a good spread."

In the past three years, QBE has gone to great lengths to expand from a largely liability-focused business in the UK to one with a wider PCM footprint that also offers other products such as trade credit — growing from a £100m business to one of £250m across the national network in the process.

He explains there are also huge opportunities in Europe where the insurer has 19 offices, adding that any growth in its middle and eastern European operations is likely to be part of a "longer-term play".

Acquisitive group
Mr Bathia claims the firm's "quirky" nature means it is popular in all the regions it targets — including mainland Europe, Canada and the UK, and particularly London where he describes it as having grown into a "powerhouse".

"Everywhere we go, no one seems to mind us — I think fundamentally that is because of the culture and values we have as an organisation."

However, this view might not be entirely shared by all QBE's competitors — the firm has been accused by some of being an aggressive upstart and of undercutting rates.

With some pride, Mr Bathia concedes that competitors were right to fear QBE when it began targeting the UK market and winning market share, albeit through more honourable methods that those it was at times accused of.

"When you get new firms coming in that are seen as a potential threat to the status quo, you will get people throwing stones, it's normal. But ask any of my underwriters and they will tell you one thing QBE does not do is chase the dollar. All that suspicion has gone away — it was a time and a place in the market.

"It's true we have hired a lot of talent and that spooked a few people because they saw that we are really serious, and saw what QBE did within the London market, the US and Australia. They were right to worry."

He smiles at the coverage given to QBE's decision to sell its non-core £20m personal lines motor book in January 2010, adding "it was tiny; if you think of it as part of a £3bn business, it wasn't really core". Fleet remains difficult he says, adding he takes "great comfort" from knowing its book outperformed the market last year. "We just need patience with that. The client affinity we have is outstanding; a lot of clients stay with us not because of price but the service we provide. Our motor underwriters tell me that rates improved by 5% in March, which is quite good — it has to move up."

In the past 10 years the firm has only made two major acquisitions in Europe — Limit in 2000 and Ensign in 2003, as well as smaller deals like Evergreen in December 2009, but he is certainly not ruling out more big deals for the future.

"You know how acquisitive we are as a group — we always have a pipeline of opportunities. We haven't made significant acquisitions in the UK space for the last few years, but if the right opportunity turns up we will do it."

However, more broadly Mr Bathia is sure that consolidation will take place in the market in the next two to three years as a result of several ongoing factors: "Weakening balance sheets, capital coming under strain by performance results, and regulation, particularly Solvency II."

Mr Bathia is unusually upbeat about the upcoming Solvency II regulation that so often draw ire from underwriters: "It is very logical and simple and it will make sure that companies operating in EU jurisdictions are fit for purpose. It will flush out some competition; so in a way I think it is quite positive.

"For me, Solvency II is embedding a set of principles and enterprise risk management into our business and, therefore, it should be seen as an opportunity rather than a box-ticking exercise. If all your people understand it, the business will become a much better one anyway."

If Mr Bathia's positive outlook for his company is anything to go by then the future for QBE will be very promising indeed. So what if it all comes with a certain Harvard spin — if you can't handle a bit of corporate jargon in this industry, it is probably time to look for a new career.