John Neal is clearly a man who relishes a challenge. Not content with a bruising five years at the helm of QBE, a tenure which included four profits warnings and some unwelcome attention on his private life, last week he accepted what Re-Insurance believes is arguably the toughest job in the industry. He will become CEO of the Lloyd’s Corporation and the man tasked with leading a turnaround in the market’s fortunes.
As this publication exclusively revealed on 6 September, John Neal was selected CEO of Lloyd’s following a meeting of the Council of Lloyd’s last week, where his appointment was approved unanimously.
The 54-year-old Brit will take up his position on 15 October 2018 replacing the current incumbent Inga Beale who led an admirable agenda of a more inclusive and diverse insurance market but who was also criticized for not recognisng the scale of reform that was required around costs, processes and underwriting standards until the sheer horror of 2017’s £2bn market wide loss.
Neal is already a well-known figure on Lime Street. His early career was at Lloyd’s as a motor underwriter and then as CEO of the Ensign Managing Agency, part of the QBE Group. In 2012, he replaced QBE’s long-serving CEO Frank O’Halloran and had to confront a business that faced a number of challenges in part because of its rapid expansion through M&A.
In this role he was responsible for running a $14bn gross written premium business with over 14,000 employees in 37 countries before he left in 2017; ironically to be succeeded by Pat Regan, the former Willis CFO who was initially earmarked to succeed Richard Ward as Lloyd’s CEO before Inga Beale was instead chosen.
On 7 September, Lloyd’s said he brings significant experience as a global CEO and has a track record as a highly effective leader who can deliver business transformation.
Bruce Carnegie-Brown, chairman of Lloyd’s, said: “On behalf of the market, I am delighted to welcome John to Lloyd’s. His wealth of experience both at Lloyd’s and internationally, including the US, will bring new insights and fresh thinking at a challenging time for the global insurance industry.
“John will continue Lloyd’s focus on delivering sustainable profitability, through a combination of underwriting discipline and market modernisation. An immediate priority will be the successful launch of Lloyd’s Brussels subsidiary which will enable Lloyd’s to continue serving its customers in the European Economic Area after Brexit.”
Speaking to Re-Insurance before the news of Neal’s appointment, market voices reported that Carnegie-Brown had a list of six minimum requirements setting out what he expects from the next Lloyd’s CEO following the resignation of Beale in June.
The Lloyd’s chairman believed it was essential that Beale’s replacement had a direct working knowledge of Lloyd’s. As if to highlight the need for a Lloyd’s veteran, leading the hunt for Beale’s successor was Sainty, Hird partner Ian Lazarus, a former Lloyd’s broker himself and an expert on the (re)insurance world.
In this regard, Neal represents a perfect candidate.
He is also someone who understands the importance – and difficulty – of turning around a large and unwieldy institution. After taking up the QBE hot seat – and a company created from a frenzy of M&A – he immediately set about streamlining QBE to simplify its structure and cut costs.
A man not afraid of making tough calls, he was forced to write down the value of a number of the firm’s earlier acquisitions causing a share-price slump in 2013.
This first profit warning in December 2013 was a sign of things to come. His five years in the top job included three further profit warnings; the second in 2014, and third and fourth coming in quick succession in the summer and autumn of 2017. Shareholders and analysts alike were frustrated – shares and confidence took regular dips and his departure last year was probably a relief to him after he faced heavy criticism about the company’s performance (despite the fact that many of the problems were hangover legacies from the past).
Neal will face fresh challenges at Lloyd’s. The 330+ year-old market is currently reeling from its worst loss since 2001. One of Lloyd’s priorities for the coming few years is to drive process efficiencies and, as a consequence, cut its expenses which are primarily acquisition costs flowing to the brokers. Its 2017 financial results revealed the Lloyd’s expense ratio was 5 to 8 percentage points higher than its rivals. In this area in particular, Neal’s experience in cost cutting and simplification will surely prove helpful.
But the Lloyd’s top job also requires thick skin. Chairman Bruce Carnegie-Brown would tell people that the right candidate needs to be someone willing to put the market before their career. You have to steel yourself to criticism regardless of how good a job you are doing because vested interests have to be challenged.
Neal is no stranger to negative publicity however. He left QBE in December 2017 following yet another profit warning. It came only weeks after his bonus was cut by $550,000 for failing to disclose to the board a personal relationship.
He succeeds Inga Beale whose tenure will be defined for many by an admirable focus on cultural change.
However, her critics will say it was an agenda that took up too much attention at the expense of reforming initiatives.
History will determine whether this criticism is valid.
In the meantime, Neal will take up the mantle as a passionate Lloyd’s insider.
“I am thrilled to be offered the opportunity to lead Lloyd’s, and will do so with the same excitement I felt when I first stepped into the underwriting room back in 1985,” Neal said. “The insurance sector is facing many challenges. For 330 years the Lloyd’s market has demonstrated its ability to innovate and adapt, and I look forward to playing my part to ensure this unique marketplace remains at the forefront of global commercial corporate and specialty insurance and reinsuranceJohn