Photography by Billie Charity
Please remember that the value of an investment can fall and you may not get back the amount invested. This article originally featured in Baillie Gifford’s Spring 2023 issue of Trust magazine.
You may know the company from the animated ads: the ones with the tricorn-hatted female ‘admiral’ and her equally helpful dog. SAINTS’ interest was caught by Admiral Group’s restless ambition. That and its leadership led us to invest in the Cardiff-based insurer in 2015.
What impressed us was how seriously the US-born co-founder Henry Engelhardt and his colleagues had set about creating a great company culture.
Engelhardt inherited his marketing genius from his father, a tough Chicagoan meat-packing boss who could “sell sand to the Arabs”. Having come to Europe to study for an MBA at INSEAD near Paris, he was part of the team that launched Admiral in 1993. He oversaw nearly a quarter of a century of stellar growth before stepping down as chief executive in 2016.
During that time and since, he and his leadership team attracted, motivated and retained talented people while constantly experimenting with new ways to grab market share. Continuous improvement helped them deliver growth and increasing dividends for shareholders. So much so that, as a listed company, Admiral has returned over five times more to shareholders than the FTSE 250 average.
If you had invested £1,000 on 31 December 2004, the year the company went public, and reinvested the dividends, the return would be almost £20,000 at the end of December 2022.
Engelhardt still mentors the company’s leaders. It was initially for their sake that he wrote his book Be a Better Boss, which captures the lessons he learned – some of them the hard way.
James Dow: What made you think, ‘Wow, car insurance! There’s an exciting business opportunity’?
Henry Engelhardt: [Laughs] Sure, no one grows up wanting to be a car insurer. Like so many things, it was accidental. I’d done an MBA and was doing a management consulting job. I read an ad about a new company looking for a marketing manager. I didn’t like being a consultant, so I took the job.
One of the first things I did was to name it Churchill – we needed a name that sounded strong, that sounded like it had been around a long time and that came at the front of Yellow Pages. We launched it in 1989. It was a big success, but I hated the culture. When a headhunter came along a couple of years later talking about a new startup, I jumped.
JD: So Admiral wasn’t part of a preconceived plan to disrupt insurance?
HE: Not at all. In fact, it was the seventh car insurer of its type in the market. But I felt confident because we were launching at an amazing moment. The UK car insurance industry was in turmoil following a mis-selling scandal. Prices were roaring upward, and everybody was shopping around. There we were, a new player with no ‘back book’ of liabilities, so everything fell into place.
Soon after that, the UK insurance market suffered one of its downward cycles, and we were put up for sale by our Bermudan owner. As there weren’t any bids, we teamed up with a venture capitalist and bought the company out.
JD: Is it true that you succeeded at first by going after drivers nobody else would touch?
HE: When we started, we saw a whole bunch of people going after the suburban small car, slightly older driver market. We couldn’t compete with their economies of scale. But the higher-premium market was dominated by brokers being paid a 15 per cent commission. We worked out that, especially for higher-risk younger drivers, we could market directly for less than the cost of that 15 per cent.
In fact, it made sense to go after the younger drivers as that gave us 15 per cent of a higher premium to undercut. We could then reduce our own premium to get the business in from these customers, who also shopped around more. We were just killing it along this line.
JD: You say in your book that your management style owes a lot to observing how not to do it.
HE: Yes, starting with my father, who was a meat wholesaler in Chicago. He was an amazing salesperson working in a very tough business, but he was a micromanager. Nobody did anything right. It was management by screaming. I was only in my teens when I worked for him, but I knew something was keeping this business small. I realised that if I wanted my business to grow, I had to let others get stuck in.
JD: How did you make Admiral a place where people felt good about coming to work?
HE: Why did we want to create a good office environment? Not just because we’re nice guys. We found that if you can motivate your workforce all day, every day, that’s a competitive advantage. People stay longer, and that retained experience is hugely valuable. Realising this, we established four pillars of our culture: communication, equality, reward and fun.
We were warned that this culture would dry up and blow away when we reached 1,000 people. Then they said: “Wait till you get to 5,000.” Well, now we’re at 11,000 and still do well in ‘best companies to work for’ awards.
JD: One way you’ve rewarded staff is by giving them shares. Why?
HE: When we did the original management buyout in 1999, our venture capital partner offered 10 per cent more of the company to senior managers to motivate us. Well, we already owned shares, so we said: “We’d like to give it to the staff.” Because when you get into bed with venture capitalists, the one thing you know for sure is that there’s another transaction coming, and there’s a decent chance that not only will the staff not share in the exit reward, they’ll lose their jobs as well.
So we set up a staff trust with 8 per cent of the company and, when in 2004 we floated, 1,400 members of staff split £56m. That was a good day. As managers, we could have kept those extra shares. But we benefited more from being less greedy and having a smaller slice of a much bigger pie.
JD: One reason Admiral keeps growing is your energy for trying new things. Can that continue?
HE: It might sound a bit sad, but we never feel we’re doing quite well enough. I’ve seen plenty of successful management teams think: ‘Oh, we’re just golden.’ We understood that that’s not the case. There’s a lot of luck involved and a lot of hard work just to stay in place. As for the future, a lot of the people at Admiral are people the founders hired and I trained, starting with the chief executive Milena Mondini de Focatiis, who is always driven to do better.
It’s recruiting the generation after that’s key. When I was chief executive, I would go to the major European MBA programmes to recruit. I’d be amazed to find myself the only chief executive there. Others would send their human resources people. But what could be more important than hiring the future leaders of your firm? Why wouldn’t you want to meet them yourself?
| 2018 | 2019 | 2020 | 2021 | 2022 | |
| SAINTS | -1.6 | 25.1 | 12.0 | 19.5 | -3.5 |
| FTSE All World | -3.4 | 22.3 | 13.0 | 20.0 | -7.3 |
Source: Morningstar, FTSE, share price, total return, sterling
Past performance is not a guide to future returns.
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