Benfield Greig Group plc

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Benfield Greig Group plc

55 Bishopsgate
London EC2N 3BD
United Kingdom
Telephone: (44) 207 578-7000
Fax: (44) 207 578-7001
Web site: http://www.benfieldgreig.com

Private Company
Incorporated: 1973 as Benfield, Lovick & Rees
Employees: 1,700
Sales: £325 million ($520 million)(2001)
NAIC: 524210 Insurance Agencies and Brokerages

Benfield Greig Group plc is the world’s third-largest reinsurance company, behind leaders Aon and Marsh & McClellan reinsurance subsidiary Guy Carpenter & Co. Benfield Greig is also the world’s leading privately held reinsurance group—a distinction that will become moot after the company completes its proposed public offering in 2003. With 35 offices and 1,500 employee’s worldwide, Benfield Greig’s operations are split between Benfield Greig Ltd, which handles the company’s international operations outside of the United States, and Benfield Blanch Inc., which represents the company in the United States. The company offers a full range of reinsurance services, including advisory, consulting and administrative support, as well as the company’s pioneering ReMetrics risk modelling unit. Benfield Greig has also been one of the fastest-growing companies in the international reinsurance market, multiplying its revenues by more than ten in the second half of the 1990s. Acquisitions, including mergers with Greig Fester in 1997, and with EW Blanch in 2001, have formed a large part of the company’s growth. In 2001, the company posted revenues of £325 million ($520 million). Benfield Greig is led by chairman John Coldman and CEO Grahame Chilton. The company expects to go public on the London Stock Exchange and is also contemplating a follow-up listing on the New York Stock Exchange.

1970s Origins

The Benfield Greig Group was a relative newcomer to the reinsurance market when its was founded by Ted Benfield and Michael Rees as Benfield, Lovick & Rees in 1973. Joining the firm that year was Matthew Harding, then 20 years old, who began working for the firm as an office assistant. By the end of the 1970s, Harding had risen to become one of the group’s top executives. In 1980, Harding bought into the firm, acquiring a 10 percent stake. Two years later, Harding became the group’s major shareholder, raising £160,000 to buy out Ted Benfield’s 32 percent share.

Harding set to work to reorient the firm, which at the time had just 20 employees and revenues of just £4 million per year, with a focus on the marine reinsurance sector. The reinsurance market in the early 1980s remained underdeveloped, and largely consisted of the offshoot business of larger generalist insurance companies. Harding sought to create one of the industry’s first specialist reinsurance firms, or as the company called itself, a reinsurance ‘intermediary’ capable of brokering reinsurance agreements among insurance companies.

1980s Expansion

One of Harding’s first moves was to hire on Grahame Chilton, who had been working as a reinsurance specialist CT Bowring, which had been acquired by Marsh & McClellan in the 1970s. Chilton quickly became part of the core leadership group at Benfield, which also included founder Michael Rees. As Chilton told the Independent: “Joining from a large company, I saw the opportunity that lay in a specialist reinsurance intermediary. The market was in its infancy, and we all felt we could create something special. I thoroughly enjoyed Matthew’s intellect and company, and I jumped at it.”

Harding’s and Chilton’s interests focused on customer service. In 1985, Harding brought in a new member of the management team, John Coldman, who had started his career in the reinsurance area in the mid-1960s with the WT Greig insurance firm, and who became Benfield’s office manager.

By 1988, Harding’s management team was in place. In that year, Harding led a management buy-out of the remaining shares of the firm, renaming it the Benfield Group. Both Chilton and Coldman became owners, with 12 and 9 percent of the business, respectively, while founding partner Rees held a similar percentage of the business. By then the firm counted some 50 employees and was posting profits of more than £4 million per year.

Over the next several years, the company established its reputation in the reinsurance market. Benfield continued to serve as a pioneer in the field, particularly with the launch of what it was to call its ReMetrics team, a system of risk modeling that became an important part of the firm’s consultancy toolbox. The company, while extremely profitable for its primary partners—Harding himself joined England’s 100 wealthiest people list in the early 1990s—remained quite small, posting under £40 million in revenues in 1993.

A Global Reinsurance Company for the New Century

By then, however, the reinsurance market was coming of age, as the company found itself joined by a growing number of specialist firms. Reinsurance had also come to play an important part in the growth of the world’s largest insurance companies, such as Aon and Marsh & McClellan, which had captured the top spots in the reinsurance category as well.

Benfield Group began to prepare for its own growth in the mid-1990s. In 1995, the firm acquired Ellinger Heath Western, a reinsurance broker that had developed a specialty focus on the non-marine market in the United Kingdom and in North America. The acquisition doubled Benfield’s size and led to a name change, to Benfield Ellinger Ltd. Harding, who had made national headlines with a £25 million investment in the Chelsea football club, remained the group’s chairman.

Tragedy struck the group in 1996, when Harding and another top Benfield executive died in a helicopter crash on the way home from a Chelsea soccer match. The loss of two of the firm’s five principal partners threatened to devastate Benfield’s business. Chilton and Coldman took over the company’s leadership, with the former taking the CEO role and the latter taking the position of chairman. While Chilton secured the group’s customer loyalty, Coldman began putting into place the groundwork for a larger organization, one less dependent on a handful of top people, while maintaining a relatively flat management structure.

An important step in Benfield’s transition from a small-scale firm to one of the world’s top three reinsurance companies came in 1997 when the firm acquired fellow U.K. group Greig Fester in a deal worth £120 million ($190 million). Greig Fester stemmed from WT Greig, founded in 1921, and Fester Fothergill and Hartung, one of the oldest U.K. insurers active in the reinsurance market, which had merged in 1974. The addition of Greig Fester brought Benfield onto the international scene, with 24 new offices around the world. Follwing the merger, both Chilton and Coldman made a point of visiting each of the group’s new offices and meeting all of its new employees.

By 1999, Benfield had successfully integrated Greig Fester’s operations and the company looked forward to continuing its international expansion. The United States became a primary target for the company’s next growth moves. In 1999, the company, which had for the most part directed its U.S. operations from its U.K. office, set up a dedicated U.S. subsidiary, Benfield Greig LLC. By the end of that year, the company had made its first U.S. acquisition, Bates Turner Intermediaries LLC, the reinsurance business of Employers RE, itself a unit of GE Capital. The acquisition helped boost the Benfield U.S. unit’s revenues past $5 million.

Benfield’s new expansion in the United States came with the hiring of Rodman Fox and Paul Karon. Both men had been top producers at troubled EW Blanch, at the time the world’s fourth-largest reinsurance firm, before being lured away by Benfield—in Fox’s case, through a salary package worth more than $4 million per year. Fox and Karon brought a number of Blanch employees and especially a number of Blanch clients, including the company’s top client, to Benfield. By the end of 2000, Benfield’s U.S. branch was posting $30 million (£20 million) in revenues. Meanwhile, Benfield Greig’s total sales had also gained strongly, topping £95 million in 1999 and £131 million in 2000.

The following year, however, saw Benfield leap into the top ranks of the worldwide reinsurance market. In May of that year, Benfield agreed to pay $179 million to acquire EW Blanch, a move that boosted its operations to more than 30 offices and 1,700 employees, with combined sales of some £260 million ($410 million). The acquisition also propelled the company into the leading position among privately owned reinsurance companies, and gave it the number-three spot in the total reinsurance market. The company’s U.S. operation was then renamed Benfield Blanch, with Fox placed in the CEO spot.

The Blanch acquisition had brought with it a heavy debt burden for Benfield Greig, and by the end of 2001, the group had announced its interest in pursuing a public offering in order to pay down debt. As part of the approach to the public offering, the company switched its registered domicile to Bermuda, a move that gave it the choice between a listing on the London and New York stock exchanges.

Company Perspectives:

Performance not promises. We exist to make your business more successful. No other intermediary is more focused on customer advocacy than Benfield Group. We offer advice that is objective, conflict free and therefore totally customer focused. We are acutely aware that we are only successful if our customers succeed.

Benfield’s announcement caught the attention of Marsh & McClellan Cos., the world’s largest insurance broker, which also held the number two position in the world’s reinsurance market. In early 2002, Marsh & McClellan prepared an acquisition offer reportedly worth some $1.2 billion. Talks between the two sides reached were said to have reached an advanced stage, including an agreement on the management structure of the new group. Yet talks broke down after Marsh & McClellan reduced its offer to just $950 million, and no formal offer was made.

Instead, Benfield Greig reset its sights on its public offering. New filing rules set up in New York following the Enron and Worldcom financial scandals had in the meantime made the New York exchange less attractive to the British group; instead, Benfield Greig announced its plans to list on the London exchange before the end of the first half of 2003. The company did not rule out an eventual listing on the New York exchange, however.

In the meantime, Benfield Greig continued to flesh out its international network. In 2002, the group acquired the Czech and Slovak offices of BMS Harris & Dixon, providing Benfield Greig with an entry into the Central European market. By the end of that year, the company’s sales had topped £325 million ($520 million). As it prepared for its public offering, Benfield Greig had already successfully transformed itself into one of the world’s largest reinsurance groups.

Principal Subsidiaries

Benfield Blanch Inc; Benfield Greig Ltd.; Benfield Premium Finance; Benfield Sports International Ltd.; Orbit Benefits Ltd.; Paragon; Wildnet Group.

Principal Competitors

Aon Reinsurance Worldwide Inc.; Guy Carpenter & Co. Inc.; Willis Faber Reinsurance; Jardine Lloyd Thompson Reinsurance Holdings Ltd.; Towers Perrin Reinsurance; Lambert Fenchurch Group plc; Am-Re Brokers Inc.; John P. Woods Co. Inc.

Key Dates:

1973:: Ted Benfield leads establishment of Benfield, Lovick & Rees insurance firm, specializing in the reinsurance market; Matthew Harding joins firm as an office boy.
1980:: Harding is given the opportunity to buy 10 percent of Benfield, Lovick & Rees.
1982:: Harding buys Ted Benfield’s share in company and becomes the largest shareholder with 32 percent; Grahame Chilton is hired.
1985:: John Coldman joins Benfield as office manager.
1988:: Harding, Chilton and Coldman lead a management buyout of Benfield, changing firm’s name to the Benfield Group.
1995:: Benfield acquires Ellinger Heath Western and changes name to Benfield Ellinger.
1996:: Matthew Harding dies in helicopter crash.
1997:: Benfield acquires Greig Fester and changes name to Benfield Greig.
1999:: Benfield acquires Bates Turner from Employers Re (part of GE Capital).
2001:: Benfield Greig acquires EW Blanch and becomes world’s third-largest reinsurance group.
2002:: Benfield announces plans to go public.