Otto Thoresen interview: Straight talking insurer tells it like it is
After acres of newsprint and 25 hours of television coverage, including lessons for BBC commentators on how to pronounce the name (Aygon, not E-gon), the insurance giant hopes Andy Murray and co have helped overcome a recognition problem that has dogged the Dutch company since it acquired Scottish Equitable in 1994.
Otto Thoresen, its UK chief executive, has been through the identity hoop many times and believes that its 25m five-year tennis sponsorship, including new equipment for schools, will play a big part in getting the message across. It is some way from achieving game, set and match, though it has reached a crucial point in the process and the feedback will prove vital.
But there is more to the Aegon campaign than building a brand. The crisis of the past two years has nurtured the public's scepticism towards the whole financial services sector, which has placed enormous demands on the industry's leaders to rethink the way ahead.
The insurance industry may have been on the fringe of a catastrophe that predominantly concerned the banks, but it has not had its troubles to seek. Endowment shortfalls, pensions mis-selling and other scandals surrounding the investments and savings sector have served up a few reminders that if the industry is to have a future it will have to learn some hard lessons and change its ways.
Thoresen accepts that trust and confidence have taken a huge knock. Brand building through sponsorship is one way of trying to win back public support, but the issue is deeper and he attended a session at last week's Association of British Insurers conference on the very topic. "We have not, as an industry, done a good job at getting people to relate to us," he admits. "Some of the things people believed in have changed. We need to demystify what we do, but we also have to reinforce what we do."
He has taken a personal as well as professional interest in trying to educate or re-educate the public about some of the basics, as well as the finer points of the way the industry works and how we got to where we are. He says that after his hairdresser asked him questions about the credit crunch he spent 40 minutes explaining to her exactly what happened. He laughs at his own indulgence in the subject. "I may be a bit of a sad case but I think it's important, and the good thing is that I seem to have got the message over."
He acknowledges that the industry doesn't help itself by using jargon and thereby excludes potential customers, particularly the young, who may not be so acquiescent as previous generations and face a different set of financial pressures, including student loans and the difficulty of getting on the housing ladder. But even after admitting that the industry is guilty of focusing more on products than customers, Thoresen opens the conversation by talking up the importance of something called the variable annuities market, a new development that has been successful in America and is now being expanded into Europe. He waves his hands about while explaining what it is, but to anyone but the well-tuned investor it can all sound a little double Dutch.
And that may be appropriate given that Aegon is headquartered in the Netherlands. Last week, the Renaissance Chancery Hotel in central London became a temporary home for a colony of senior executives from its headquarters in The Hague who joined a regular briefing for City analysts. Group chief executive Alex Wynaendts (rhymes with finance), who has just completed a year at the helm, led a series of presentations headed with the message that despite the sector's woes the company is steaming up the insurance industry rankings. Brand recognition in the UK may be high on its agenda, but that little local difficulty has not halted the company's growth. From being a top ten provider of UK life and pensions it is now in the top three, and it could not have made such progress if nobody knew anything about it.
Much of this growth is a result of diversification from its core life and pensions business into other areas – such as those variable annuities. There have also been some high profile hires in the UK, part of Thoresen's team rebuilding; sending 800 staff on Henley management courses, and taking some brutal decisions such as pulling out of the group risk market, which involves selling protection policies to companies for their employees. He admits it is difficult to get the pricing right for such products, due to the variable circumstances of each employee and, in any case, it is a market dominated by four main players who have clearly got it sewn up. Pulling out will jeopardise 147 jobs in Edinburgh, though some will be redeployed in other parts of the company, as will the 47m it currently absorbs.
He's understandably more focused on those parts of the business that are contributing to a growth in UK market share from 6.3 per cent in 2005 to more than 10 per cent in the last quarter of 2008. However, the group last year reported its first ever loss and after two strong years of growth in the UK overall business was down 6 per cent in the first quarter of this year. Thoresen's only comfort is that his rivals suffered even greater falls, some in double digits.
Clearly, there is work to be done and focusing on the young is a key platform for the future. They have to be persuaded that after the scandals of recent years, insurance, pensions and other savings products remain wise homes for money they have preferred to spend on holidays, clothes and almost anything else apart from their long-term future.
As employers close down pension schemes or move to cheaper alternatives, it puts more pressure on the providers. Thoresen acknowledges the challenge. "If we want the industry to succeed in the longer term, we have to think afresh."
He chaired a year-long review on behalf of the Treasury, looking at how a national service providing people with guidance and information on money matters should work in practice. His recommendations published last March recommended a national money guidance service available to all, providing free, impartial information and advice on budgeting, saving, debt management, borrowing, insurance and retirement planning. It has been trialled in two areas of England.
He expects to see money guidance become more widespread in schools and in the workplace, not to sell products but to provide essential information for people to prepare their financial future. "It is about how to engage with people when they are beginning to think about building their nest egg and what part the industry plays in that," he says. It concerns him that the young no longer share previous generations' willingness to "put something aside" for the future. "We have much less engagement with younger people. An insurance culture, the man from the Pru and all that, was a part of life but it is not happening now. But one good thing that may come of the recent crisis is a change in people's approach to money. There is a view that this may see them adopt a better balance of savings and spending and they are showing more interest in knowing more about how best to do that."
Thoresen, a Scot born to a Norwegian father, is 15 years into his second spell at Aegon UK, having first joined Scottish Equitable in 1978. Four years ago he stepped up from finance director to take the top job at Aegon UK.
Recently his name has been linked with other senior positions, not least at Standard Life where Sandy Crombie will be vacating the chief executive's post. Would he be a contender for the job? "The whole thing has been running for far too long," he says, an apparent reference to the long-running speculation about who would replace Crombie, a story that goes back to the flotation of Standard Life in 2006.
So is he ruling himself out? "Yes," he says. In that case, the headhunters would be wasting their time chasing him? "I am very clear that my commitment is to Aegon UK," he says.
So at least that's one issue that's settled. Perhaps.