I have long thought, when reporting on financial updates from Quilter plc, that the international side of the business seemed to receive fewer and fewer lines of coverage over time.
This was likely a reflection of the firm’s openly stated strategy to focus on the UK.
So, it wasn’t a great surprise when it was announced in December 2020 that Quilter International was under strategic review.
Rumours abounded about who might buy the company, but it was confirmed on 1 April that fellow Isle of Man insurer Utmost Group was stepping in to acquire the firm.
Shortly after the announcement, International Adviser sat down with Paul Thompson, group chief executive of the Utmost Group of Companies, to find out what attracted him to Quilter International and find out more about his plans.
Utmost Group of Companies is no stranger to M&A deals. It started life as LCCG – Life Company Consolidation Group – with its purpose clearly stated for the world to see.
The group adopted the Utmost moniker in 2019.
Thompson describes Quilter International as “like a mirror image of our existing business, only slightly smaller”.
“So, it’s an absolute classic in market consolidation, where we acquire our probably number one competitor and integrate the two businesses. We use the best products, innovation and distribution and become much more efficient and stronger in each market.
“This means we can offer great service, a good modern pipeline of products and stay ahead of where the markets and regulation are moving.”
Despite the ongoing political tension in Hong Kong, Quilter’s office there made it particularly attractive.
The intention had been to re-establish a presence in the special administrative region after Utmost acquired Generali Worldwide, which had been forced to close to new business as two branches of the same company cannot operate under the same category of licence in Hong Kong.
“We haven’t actually been writing new product in Hong Kong since we bought,” Thompson admits. “So, having a branch which is open with a licence and a modern high net worth product is a good thing.”
In addition to overlaps in Singapore and the Dubai International Financial Centre (DIFC), the Quilter acquisition will give Utmost a greater foothold in Latin America.
Dearth of products?
One common complaint I hear from financial advisers across the world is that there are too few products and consolidation is removing competition from the market.
Thompson doesn’t agree. “We find these markets incredibly competitive and there are plenty of providers. Margins have been under a lot of pressure.
“As product providers, we struggle to maintain margin, so we do have to get bigger and more efficient and build much stronger brands.
“I think what you’re seeing is the shift away from regular premium products with high commissions to a single premium product with more features and flexibility for the underlying investment solution, adding better value for customers.”
What about the people?
When it comes to combining the businesses, one of the most obvious questions is how the consolidation could affect headcount.
Thompson actually plans to recruit in the UK and Isle of Man.
“Quilter International is dependent on about 200 people in the UK, who are in the heart of Quilter. Some will transfer across with the business and some won’t. So, there will be a run of recruitment over the next six to nine months the support the business.”
When it comes to the overseas branches, he expects there will be some reduction but anticipates, “given that turnover can be quite rapid, that we will deal with that through natural attrition”.
One feature of the Quilter International acquisition that hasn’t happened in Utmost’s previous M&A deals is that it involves an advice firm.
AAM Advisory is based in Singapore and was bought by Old Mutual in February 2016.
“It hasn’t been our model to date, to have a brokerage,” Thompson says. “We are agnostic when it comes to distribution, with 700 to 800 distributors around the world.
“At some time later, we will need to think about whether that fits into our strategy.”
International Adviser reached out to AAM Advisory but the firm was unable to comment at this stage of the deal.
Having made three substantial acquisitions over the past few years, what are the key lessons the team at Utmost has learned about integrating businesses?
“It’s an aggregation of the small things. Doing that well. It’s having the knowledge of the markets we’re operating in, particularly from a relationship with regulators, which is important.
“It’s moving quickly from senior management and leadership, and setting them the task to deliver the target operating model in the jurisdictions.
“We believe in selecting people very early and empowering them to deliver and being proactive and realistic about how long it takes to do platform migration.”
As for future deals, Thompson thinks the Quilter International acquisition will be the last major international purchase.
“The Generali acquisition was about footprint. This is about beefing up that footprint. Anything else would be incremental, maybe a specialist capability somewhere. I don’t think it will be anything as big as this.”
His attention is now on the UK.
“We’re relatively small and we’ve always wanted to have a much bigger presence in the UK, which is currently in run-off. One side of the business is now significantly bigger than the other and we want to try and address that over the next two or three years.
“I think our assets under management will continue to increase dramatically, but probably not on the international side.”