Consummate Risk Taker : New Head of Lloyd’s Insurance Cuts Costs and Woos Investors
Peter Middleton says he needs only three or four hours of sleep a night. Considering the job ahead of him, it’s amazing he can get that much.
As chief executive of Lloyd’s of London, Middleton, 52, confronts a mess that seems even deeper today than when he arrived there last September.
The venerable insurance exchange is in the midst of the worst crisis in its 306-year history. Its capital base has been eroded by disasters ranging from the howling destruction of Hurricane Andrew to the quieter ravages of lung disease among American asbestos workers. And its free-for-all structure--in which scores of independent underwriting syndicates sell insurance under the Lloyd’s name with little supervision--has proved horribly inefficient.
Lloyd’s became famous for its willingness to underwrite practically any kind of risk. It once insured a comedy group against the risk of someone in the audience dying of laughter.
But its maverick ways had their costs. “From the late ‘70s through now, Lloyd’s got fat and complacent and let its costs grow out of control,” Middleton said Friday during a visit to Los Angeles.
For a contemplative sort--a former Marist monk and Sorbonne philosophy scholar--Middleton has taken decisive action. He has ordered Lloyd’s support staff slashed from 2,200 to 1,600 and its annual corporate budget chopped from $210 million to $165 million.
He has dispensed with some of the amenities that have defined the Lloyd’s style, including the fresh-cut flower displays and uniformed servants on duty in the marble-lined upper floors of Lloyd’s sprawling headquarters complex in London.
These latter economies have had far less impact on Lloyd’s budget than the layoffs, but they are perhaps more important because Middleton sees his fundamental task to be changing the culture of an institution that--charming as it may have been--was losing its ability to compete.
Lloyd’s last year reported a record loss of 2 billion pounds--nearly $3 billion at current exchange rates--for 1989. (To make sure that all losses are accounted for, Lloyd’s takes three years to close the books on a year of business.) In recent weeks, it has become clear that losses for 1990 will be nearly as bad.
Some of the Lloyd’s “Names"--wealthy individuals who provide the capital to Lloyd’s underwriting syndicates--have seen the losses wipe out fortunes that took generations to build.
The financial reversals have led to family breakups and suicides. They have also thinned the ranks of Names from a peak of 32,000 in 1988 to 19,800 today, including about 300 in California.
Middleton and Lloyd’s chairman, David Rowland, are in the midst of developing Lloyd’s first business plan, which is meant to attract new capital to the market, improve its efficiencies and restore Lloyd’s to “serious profitability.”
Middleton is an interesting choice for the job, lacking any insurance experience but having just finished an impressive turnaround of the Thomas Cook travel business and arranging its sale to German interests.
The son of a Teesside factory foreman in England’s industrial north, Middleton was a talented half-miler who was expected to run for England in the 1968 Olympics but was sidelined by an ankle injury. He still competes in two or three half-marathons a year; he also smokes cigarettes, a habit he took up at 7 and has given up trying to quit.
In his teens, Middleton joined a small Catholic monastery in the south of England run by a French order, the Society of Mary. “I wasn’t a very good monk,” Middleton said, but he got a rigorous education in five years there.
Middleton quit the monastery, spent a year at the Sorbonne and three more at Hull University in England. He followed with a tour in the British Foreign Service, in Indonesia, Tanzania and Paris. Newspapers have said he was a spy; Middleton described the work as diplomacy, political reporting and economic development.
The diplomacy will come in handy now. Middleton is in the midst of a global fence-mending trip. He met with 200 of Lloyd’s Names and brokers in San Francisco Thursday night, was to greet another group in Los Angeles on Friday and then move on to Hong Kong and Australia before heading back to London.
One group of Names faced with huge losses from lawsuits brought by asbestos victims now contends that Lloyd’s withheld critical information. The Names say that when Lloyd’s agents invited them to invest, the agents knew but never mentioned the danger that the lawsuits posed.
These Names want to be relieved of their liability, which could devastate Lloyd’s. Middleton may have to negotiate a settlement that will accommodate them without bankrupting the exchange.
To unwind from such pressures, Middleton balances his 17-hour workdays with high-speed jaunts on his motorcycle. He also indulges a passion for music, ranging from Puccini to the Who.
When a reporter arrived to meet him Friday at his hotel room near Los Angeles International Airport, Middleton was in a deck chair on the balcony, dozing in the morning sun, a glass of Coke and a half-empty pack of Dunhills at his side.
“It’s terribly important to stay physically relaxed,” Middleton said. “You don’t have to pace all over the room saying, ‘Oh, what problems I’ve got.’ ”