Edward the conqueror

It has certainly been a busy year for Edward Fitzmaurice. Only a couple of months after he joined as chief executive of Hastings and Equity Direct on 1 April 2008, IAG announced it was selling parts of its UK business. Now, the details of a management buyout led by Mr Fitzmaurice, together with the chief executive of Advantage Keith Charlton, have been announced.

In addition to Hastings and Advantage, as part of the deal, which was financed by private investors, the team has acquired internet brands insure.co.uk, insurepink.co.uk and insureblue.co.uk.

Speaking to Post the day after the 18 December announcement, Mr Fitzmaurice confirms he has been involved in MBO talks for the last couple of months. However, he reveals that it "wasn't the only option for IAG to consider, there were other options for them", although he is not prepared to divulge further details.

For the three years prior to joining Hastings, Mr Fitzmaurice worked at Homeserve as CEO of its warranty division. Before this he spent 14 years at Dixons Stores Group in charge of service delivery, warranty services and infrastructure.

"Over the last four to five months we have put in a brand new management team to both Hastings and Advantage and everybody is hugely excited about the business and its potential," he says. "We genuinely believe we can make the best of the business. We have great plans; we want to take it into different areas; grow the business and reposition it in the marketplace. We want to improve customer service, become known for something else. We've got great passion and great excitement for it.

"The agreement reached with IAG is probably the best deal for the management team and for IAG as well."

Mr Fitzmaurice says Hastings Direct, and the rest of the companies, have "great brands", adding that there is a desire to "broaden the appeal of the business".

"We want to see ourselves, within Hastings Direct and within those brands, as a broker," he adds. "We want to satisfy customers' needs and identify the customer segments to go for. We intend to use the brands we have and acquire good quality customers that we can then work much more broadly with."

In a bid to broaden its product ranges, Hastings, which has been almost solely underwritten by Advantage for the past two years, is returning to a panel set-up. So far, it has signed up six insurers - Axa, Chaucer, Highway Insurance, Markerstudy, Premier and Provident. They were are all due to go live by the first week of January. Mr Fitzmaurice explains this will allow Advantage to focus on becoming a niche underwriter in areas where it has a "competitive advantage" and move away from being a mass-market insurer. According to Mr Charlton, speaking at the time of the buyout, the acquisition "presents a significant opportunity to grow in the UK personal lines market" and confirms that Advantage will be transformed into a "specialist niche underwriter".

Mr Fitzmaurice adds: "We genuinely want to make Hastings Direct into the consumer champion. We want to be known as the people to come to for good value, the right product and good service. And we will work with the best insurance companies to provide the products behind that."

By extending its product ranges, he plans to grow its household insurance operation and ideally reach a 50:50 split between that and motor, with the latter currently representing about 85%.

Live and kicking

To this end, in early December, Hastings Direct went live - for the first time - with aggregator Confused on household. Mr Fitzmaurice confirms there are plans afoot to launch on more price comparison sites in the future but this will be a gradual process. "We want to make sure that what we do fits in with our reputation and that we get it right," he adds.

As reported, Neil Utley, chief executive of IAG UK, is a "minority shareholder" in the new business although the exact size of his stake has not been revealed. He has also been appointed as non-executive chairman of the group. When asked about the identity of the other private investors - and any possible link with Towergate's Peter Cullum - Mr Fitzmaurice refuses to be drawn, joking that "the reason they are 'private investors' is because they are private".

"If you look at the financial markets at the moment, there are very few businesses being sold and very few businesses in particular where even private equity is buying at the moment with the current credit situation," he adds.

Mr Fitzmaurice says the private investors see the company's potential and praises the individuals for being "willing to put their money where their mouths are".

He adds that he is excited about the company's future. "I don't think I have spoken to anyone that thinks this is bad for the business. Everybody is really fired up by the potential of where we can take it.

"When talking to people over the last couple of weeks, everybody has said they regard Hastings Direct and its brands almost like a sleeping giant. It's got fantastic potential, fantastic reach and it genuinely stands for something in the marketplace," says Mr Fitzmaurice.

It is no secret, however, that IAG has sold Hastings and Advantage for a fraction of the £140m the insurer acquired them for in 2006. When asked why IAG sold for such a loss, a spokeswoman will say only that it was a "strategic decision".

On announcing the sale last month, Michael Wilkins, IAG group CEO, added: "In July 2008, we announced IAG's refined corporate strategy designed to improve the performance of the group. As part of that strategy, we took a decision to scale back our operations in the UK, to concentrate on being a specialist motor underwriter through our profitable Equity Red Star business. That meant exiting our mass market distribution businesses in the UK.

"We took this decision because the performance of these parts of the business had been severely impacted by the protracted challenging conditions in the UK's private motor market, and we do not expect these conditions to improve for at least another 18 months.

"After considering a number of divestment options, we have now agreed to sell those businesses in two separate transactions."

The company says these transactions, combined with the costs relating to the recent closure of IAG's specialist Lloyd's syndicate Alba and associated underwriter Diagonal, will result in IAG recognising a pre-tax loss of approximately £40m in 2009.

Mr Wilkins also said he believes the sales - which remain subject to regulatory approval and are expected to be completed in early 200 - "represent the best outcome available to IAG shareholders, particularly in light of the deterioration in market conditions that has occurred since July".

Plans for the future

Talking about the current challenges in the market, Mr Fitzmaurice tells Post: "The insurance industry has changed dramatically over the past couple of years. And it's changed for several reasons. TV advertisement has become much more difficult, much more expensive; the growth of the internet has made it much easier for customers to shop around to get good value; and with the growth of the internet we have witnessed the growth of the aggregators.

"If you look at the market today, and compare customer shopping habits with that of only one to two years ago, it's very, very different and I see that changing again in the future. I believe we will always want to be with aggregators and will always be dealing with call centres and on our own direct website because customers will choose to shop with us in those ways. How the future pans out over the next couple of years will be very interesting. If you look at sectors, such as travel, five or six years ago when Expedia started everybody said it would prove the death of the high street travel agent. Yet, it has only grown to a certain market share because some people feel more comfortable using the high street. It's about having solutions that work for customers and, as customer preferences change over the next couple of years, our challenge within the business is to make sure we are positioned to meet those needs."

Mr Fitzmaurice explains: "Over the last six months we have expanded the product ranges (on the internet brands) quite significantly and would like to do much more of that going forward. We need to position those brands so they are not necessarily competing with Hastings Direct but are looking for different customers to relate to."

Transition period

The online Insure brands are currently based at the old Equity sites - in Colchester, Brentwood and Southampton. "We haven't quite decided how we will make that work over the next couple of years. But as part of the sales process, the two businesses - IAG and the new company - will continue to work together for at least a year in managing that transition," Mr Fitzmaurice says.

A number of other changes have already taken place under IAG's stewardship, including the closure of Hastings' Leicester contact centre as well as that of the Manchester centre, which was due to close before Christmas. At the same time, the call centre at Hastings' head office in Bexhill-on-Sea is being upgraded and expanded. Mr Fitzmaurice says this has "helped create the right infrastructure" and that it is beneficial having everyone under the same roof.

Talking about plans to boost the 830-strong workforce, Mr Fitzmaurice adds: "We have a great opportunity to grow the business. I am genuinely hoping over the next couple of years that we will substantially grow our customer base and the number of employees we have."

He adds: "We have a great business. We are very fortunate. It's a great deal for us and a great deal for IAG that we have reached this agreement at this time. We can take the business to great places and will be working in partnership with the insurance industry to make sure we get the best products that can match what our customers want. I think it's a fantastic opportunity for everybody."