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Cox departure stuns market

The sudden departure of Neil Utley as chief executive of Lloyd's motor insurer Cox on 11 June was met with surprise and shock.

The move, and the unusually candid comments from senior Cox management, has led to criticism in the market, with suggestions that it raises more questions than answers about the company and the reasons behind the popular Utley leaving.

And Cox continued to surprise observers on 14 June with a public response to "misinformed speculation" about its terminated takeover talks with rival Highway and the suggestion that Syndicate 218 reserves could be £70mn short.

Utley will be replaced by former Coutts chief executive Andrew Fisher, who will join the company from financial services group CPP. Utley will reportedly receive compensation of £264,000.

Fisher is also a non-executive director of reinsurance broker Benfield and has been an advisor for private equity firm Carlyle Group, focusing on consolidation in the European financial services sector.

And it is Fisher's track record in this area that seems to be behind the change, according to the insurer. Peter Owen, who will step down to non-executive chairman from executive chairman, commented: "Having laid firm foundations upon which to develop our business, we are now ready to exploit the significant opportunities for growth and consolidation that exist in both the insurance and underwriting sector."

"Andrew Fisher is the right person to spearhead this next phase of the company's development. His operational experience and strategic understanding of the changing financial services market make him exceptionally well positioned to lead us in accelerating the pace of growth across the Group," he continued.

Fisher commented: "I am very much looking forward to driving Cox's growth strategy and building market share both through consolidation and through organic growth in Cox's strong portfolio of business."

Despite praising Utley for his contribution during his five-year tenure, and denying the move had anything to do with the recent collapsed Highway deal, Owen was quoted in the Daily Telegraph as saying: "He was not as strong in areas like mergers and acquisitions relationships, bank relationships and growing the business."

He added that "the board decided we needed a different skill set going forward". Cox was also subject to a failed takeover from entrepreneur Peter Wood a year and a half ago. Utley was a member of Wood's potential buyout team for Cox, having previously worked as Wood's chief executive at direct insurer Privilege.

Owen continued: "We are making the change because the business has been stabilised. We want to grow it and want someone with more experience in those areas. There is no sinister plot. We have not fallen out."

'Asked to leave..'
Market sources suggest genuine surprise at the suddenness of Utley's departure. "He was very well liked and I think it was a surprise to many in the market. Reading between the lines it would seem he had been asked to leave," revealed one to The Insurance Insider.

And equity analyst Eamonn Flanagan of Shore Capital challenged the reasons publicly given by Owen. "I find it astonishing that people are questioning his ability to achieve their growth strategy. If you look at his track record he was definitely the man to do it. He has consistently achieved top line growth together with bottom line profitability."

He also questioned the comments relating to Utley's ability to bond with the banking sector. "I find that extraordinary. If Neil hadn't been around two years ago, there might not have been any restructuring at Cox."

"If I was Neil Utley at this time, I would be very angry at the noises coming out of Cox. It sounds to me as if they're attempting to rewrite history," he added.

Cox underwent a restructuring after suffering £241mn losses in 2001 after being hit hard by the 9/11 terror attacks. It ring-fenced its Lloyd's liabilities and went to the markets to raise £73mn to grow its motor business.

Cox said it was prompted to make its 14 June statement because of its obligation under the UK Listing Rules.

In it the insurer revealed: "The termination of discussions with Highway was initiated by Cox after its Board concluded that, although a combination with Highway could have delivered substantial synergies, a transaction would not be suitably accretive either to Cox's net assets or earnings based upon the expected amount of retained business, reserving, and the need to conform accounting standards across the combined group.

"After becoming aware of Cox's concerns, Highway presented its draft views of Cox's reserving position including comments attributed to EMB, Highway's actuarial advisers, which purported to show that Cox's reserve position was inadequate. At no stage prior to this presentation had Highway or EMB discussed their views of Cox's reserving position with Cox's management or actuarial advisers.

"On receiving this presentation, Cox promptly examined in detail each of the statements relating to its reserve position and shared the presentation with its own actuarial advisers. The Cox Board was fully advised of this presentation and management's analysis and concluded that there was no substance to the suggestion that Cox was under-reserved," continued the statement.

Cox added that it wished to reaffirm the robustness of reserves reviewed by Syndicate 218's actuaries Deloitte & Touche, and audited by PwC.

"Cox's track record, and that of Syndicate 218, demonstrate that their methodologies for estimating claims liabilities are prudent, combining thorough analysis of historical experiences and expert assessment of future trends, taking into account the particular characteristics of different classes of business," the statement concluded.

But it seems that a somewhat unconvential week at the insurer has done little to dampen the fires of speculation.

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