“The real strategic shift at Reliance Mutual happened at the turn of the century. Prior to that, it had been a familiar direct-selling mutual writing a full range of products, particularly personal pensions.
In the late 1990s, the pension review hit the company pretty hard, so at the end of the century it retrenched quite heavily, cut costs and decided to exit distribution. It got quite a bit stronger after cutting costs but it was then a question of what strategy to follow.”
It decided on a strategy which Goodale describes as the “selective acquisition of small books of business and also niche products where we can find them”.
The programme of acquisitions has now been running for five years. It has acquired seven closed books and looks after £1.7bn in 300,000 policies. Goodale, appointed as chief executive in July 2006, says it is acquiring a reputation as a with-profits specialist as other companies look to offload time-consuming non-core business.
“We are developing a niche because a lot of people have exited with-profits and the corporate governance overhead is often disproportionate to the value to the business. That is what we do – with-profits governance – so we have no problem picking up more with-profits business. One chief executive told me that his with-profits business is 17 per cent of his total business but it is 70 per cent of board time.”
Goodale says with-profits suffers from something of a bad reputation. Closed funds have a particularly poor reputation but he says this in unfounded in Reliance Mutual’s case.
“I think it was Aifa’s research which said 54 per cent of IFAs consider that just being in a closed fund is grounds for telling a policyholder to move but the FSA came out and said that is a myth. There are bad closed funds and good closed funds, there are bad open funds and good open funds.”
Reliance Mutual runs six separate funds and Goodale says the with-profits payouts are second only to the Phoenix funds which are currently paying three times the market rate.
“I am in the minority that thinks with-profits can be a good thing – I say ‘can be’ because it does depend on where and when and how.”
Born in England, Goodale was raised in South Africa. After qualifying as an actuary, he worked for several companies in South Africa including Prudential and Commercial Union. He moved back to the UK in the mid-1980s and spent 10 years with Manufacturers Life before moving to Ecclesiastical and then Reliance Mutual.
The move to smaller companies is clearly something he has enjoyed. With 85 employees, he says Reliance Mutual is a business where you know everyone’s name. “You can mould them, you can be much more responsive to market conditions and needs, you can create change. As a chief executive, you can touch all the parts of the organisation fairly quickly, it is not the super-tanker stuff.”
Despite the acquisitions, staff numbers have not increased substantially and Goodale says the efficiency of the business is why it prospers in an area where others can struggle.
“We are able to move business on to our system as quickly as possible, so we do not run satellite offices, we do not have legacy systems – we have managed to resolve all those sorts of issues you hear about other companies wrestling with.”
As a mutual society, Goodale says Reliance is ideally placed to keep growing in current market conditions. It has avoided all the toxic debt in the market and a preference for uncomplicated financing is paying dividends. “We are not into sophisticated financing arrangements to buy these things. If we have not got the cash, we do not do it. I use the word cash on purpose, not just assets that may not be worth what we thought they were worth. It is a conservatively run business and that is absolutely the right thing to do for this market.”
The lack of shareholders means the business is able to take a longer-term view without the distraction of short-term growth targets.
“We are able to set long-term plans and work our way through them. The challenge for a mutual is not what the market wants it to do but what is right for its members.”
Regardless of the lack of quarterly growth targets, the plan for the business is more acquisitions. Despite closed funds being, by their nature, a reducing market, he says there will be plenty of opportunity for the foreseeable future.
“One might think it might stop eventually, as there cannot continue to be closed funds, but companies in these tight times are continually looking at non-core books of business.”
Goodale says the business is in talks over several more acquisitions but only time will tell whether it is five years or five minutes before they come to fruition.
Looking further into the future and away from the closed fund business, Goodale says the business will have to develop further products of its own. It offers a smokers’ annuity which Goodale confidently says is continually among the best rates available.
He says it is looking at developing other niche products but is not able to announce any formal plans. It is also looking to expand its white-label protection business.
Goodale says Reliance Mutual has not done a particularly good job of growing this part of the business but this is something he aims to change. He says he is determined to finds ways to generate new business which is not dependent on acquisitions.
“It is an area we have not spent too much time on, mainly because as a small organisation we have been rather successful on the acquisition front. Longer term, that is our future, a range of new business, of which this is one.”
Born: Haslemere, Surrey
Lives: Cheltenham and Tunbridge Wells
Education: High school and university in Johannesburg, South Africa
Career: 2006-present – chief executive, Reliance Mutual; 1996-2006 – general manager, financial services division, Ecclesiastical Insurance Group; 2000-02 – chairman, Safe Home Income Plans; 1986-95 – chief financial officer, appointed actuary and principal UK executive – Manufacturers Life Insurance. Previously at Prudential, Anglo American Life and Commercial Union in South Africa
Dislikes: Negative people
Drives: BMW 3 series coupe
Favourite book: Thrillers, generally anything by John Grisham or Tom Clancy
Favourite film: Zulu
Favourite album: Anything by Queen
Career ambition: To ensure Reliance Mutual continues to be successful
Life ambition: To get proficient at the guitar that I keep in the cupboard
If I wasn’t doing this I would be … Rock musician