Insight and Intelligence on the London & International Insurance Markets

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Of Mice and Men

Mark Geoghegan 1 November 2016

One of the differences between great companies and not-so-great ones is that the former always keep costs under control, while at lesser firms expenses are rarely properly managed, and can often come under severe pressure.

At the latter it is the lack of control that leads to the build-up of pressure, which can then only be relieved in a sudden, violent and often arbitrary way so that numbers can be met.

Expenses have a way of sneaking up on the unwary.

They're a bit like rodents in that respect.

First there are none obviously visible, but once they are in they start to reproduce and multiply and an alarming rate.

Here I must confess that we journalists don't do a very good job. Our typical reporting of expense control is asymmetrical - we always focus on job losses.

The typical headline always runs: "Up to 250 jobs to go in restructuring at (insurer/broker) XYZ."

As there is always some form of reconstruction and realignment going on in these mega-organisations, this kind of story can run pretty much once every 24 months for each company.

Now if such articles told the whole story it would mean that over time no one at all would be left working at any major insurer.

The reason behind this anomaly is that everyday hires are just not news, while mass redundancies are. What our reports always fail to point out is that even while restructuring and synergising, these same companies tend to always be hiring too.

The default setting is that headcount is always on the rise.

Now - maybe it comes with the territory - but a financial journalist is never far from a rodent.

We seem to follow each other around.

It's probably because we operate and thrive in the same areas - the cheaper offices in the centre of bigger cities are the ideal habitat for us both. And since journalists are notoriously messy, prone to eating at their desks and keeping irregular hours, it is perhaps inevitable that our paths regularly cross with those of our little furry nocturnal friends.

As something of an acquired rodent expert, I can attest that the main observation is that it takes constant vigilance to avoid the reoccurrence of mini-mammal plague scenarios.

The Q3 results season is showing that industry management has decided it is time that the expense plague of the last 10 years is going to be decisively tackled.

We wonder what took some of them so long.

Back to what I said at the top - now that it is coming into focus, controlled expense reduction is just another new way for the management at great companies to demonstrate their clear superiority over lesser rivals.

Some will do it a lot better than others.

This article was published as part of issue November 2016/1

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