Strategy & Operations » Leadership & Management » Chesnara CFO on driving consolidation in life and pensions

David Rimmington describes his decision to joined Chesnara, the FTSE-350 listed insurance consolidator as something of a “leap of faith.” That’s because after 13 years building his career in management accounting at insurance giant Royal London, he took on the designate finance director at rival Chesnara on the expectation he would be soon taking on the top finance role.

But things didn’t pan out as quickly as he expected in this respect when the incumbent declared his intention to stay another four years. In the event, the top finance job was his two years later, allowing Rimmington to put in place all he has learned in a career working across financial services.

The decision to make the big step up from Royal London, not only saw him take on a much bigger role, it also brought an international dimension as Chesnara had already expanded into Sweden before his arrival. “The international profile interested me,” he says, as well as the challenge of undertaking deals that expand the group’s book to create economies of scale.

Rimmington says he enjoys problem-solving that the integrating of businesses, from a finance perspective, requires. But he adds: “Some of the integration projects we work on when we buy a business, are so complex you almost wouldn’t start. You do to some extent have to make a series of practical decisions and have a general vision of where you need to get to, there’s no script to work from.” he reveals.

Although Rimmington turned his back on engineering, having studied natural gas engineering at Salford University- after attending a comprehensive school in Derby- the engineer’s problem-solving instincts are very much intact.

Instead, he opted to join Big Four firm KPMG, where he qualified in accountancy, in Manchester after deciding “it was clear engineering just wasn’t doing it for me. I liked the idea of working in a large professional organisation with a lot of like-minded people,” he explains.

On adapting to new surroundings with each new audit placement, he says:  “It was an ability to go into an organisation and absorb within a three week period quite a lot, to get enough understanding quite quickly to be credible.”

After KPMG, a brief period followed at insurance group Refuge, before moving on to a three year stint at the Co-op Bank. As the head of an activity-based costing (ABC) function he says was the first step up the management accounting route. He says the role allowed you to “see across the business,” in what was more of a business analyst role than finance.

Refuge merged with United Assurance Group, and when Rimmington rejoined the company as head of management reporting he found himself working with former colleagues at the enlarged group. The business was then purchased by Royal London.

“I was pretty much head of management reporting throughout this, I think what changed more was the size and responsibilities of the department as the company grew, acquiring businesses such as the pensions business Scottish Life, and the business you were looking out over got bigger”, he says.

Understanding how to manage the finance function of a complex organisation created through acquisitions prepared him well for his arrival at Chesnara, which was formed in 2004 when it was carved out of estate agency group Countrywide. On areas such as presenting to the market he says: “Really it was just about spending a couple of years with the FD on the investor roadshows.”

The group initially consisted of Countrywide Assured, a closed life and pension book demerged from the parent before acquiring the open Swedish life and pensions book (Movestic), a closed Dutch business (Waard) and finally a Dutch business open to new business (now called Scildon). In addition, further UK businesses were added along the way. Total funds managed are approaching £8bn, consisting of £2.4bn in the UK, £2.8bn in Sweden and £2bn in the Netherlands.

When the opportunity came to join Chesnara, Rimmington says he wasn’t actively seeking a new role. “I wasn’t looking for a job, but I was at that point in my career having been in a large organisation 13 years, where you think if I stay here much longer I’ll probably be here for life,” he says.

He took a pay cut for the “promise of jam tomorrow”, swapping an eight-minute journey to the Royal London offices in the Manchester suburb of Wilmslow for an  an hour and 15 minute commute each way “to a small organisation which I didn’t really know a whole lot about,” he reveals.

“It was a difficult decision, but when push came to shove, I just thought I could see in five years’ time a possibility of being in a much better position than five years staying where I was,” says Rimmington. “It could have been very easy to rationalise in my head it wasn’t quite the right position, but actually it was a fantastic move because my career is in a completely different place now, and actually I realised I’d got skills that would never have come out in another position,” h adds.

Adapting to the model

What is the biggest challenge regarding growth? “Every time we do a deal, we’ve got to embed a new organisation, what’s difficult is that sometimes we integrate systems, sometimes we don’t integrate the systems and we have outputs coming into a common one. I think the biggest challenge is the human one, and in any organisation there are people who are initially uncomfortable and potentially resistant to the unavoidable change brought about by an acquisition,” says Rimmington.

“If we report in a particular way or want to produce management information for the board in a particular way, there’s technical challenges but the main one is actually the ability to influence the new companies to provide that information. You’ve probably got people who are a little bit unsettled and they might need to adapt to the challenges of the change of ownership,” he says.

On soft skills he says: “I think I’ve always had the ability to influence,” he says. “My audit background gave me the ability to build relationships quickly, to look outwards rather than being an inward facing accountant.”

That has helped in the life and pensions sector, which involves working closely with a number of different professionals, including actuaries who crunch mortality rates and related data. “Anyone who thinks you can be an effective finance function operating in a completely devolved silo is wrong. At Royal London I spent a lot of time training non-finance people into the financial dynamics of a life company, to them to understand the concepts of what makes a life product profitable,” he states.

“Whereas back in the day you had sales forces who didn’t always understand the profitability dynamics of the products, we worked to make sure as many people in the organisation as possible had a good base understanding,” he continues.

Keeping  it simple

One aspect of running finance that appeals to Rimmington is the need to keep information as simple as possible, given the scope for huge amounts of detail in the life and pensions space. “Because I’ve always worked in complex businesses, I think it’s very important to be able to communicate the inherent complexity in as simple and clear a way as possible,” he says.

“Let’s not pretend we’re special people because we happen to have actuarial and finance qualifications. I’ve always liked to have some sort of bridge between finance and investors, finance and the business,” he adds.

Because it operates a lean structure, certain areas of expertise such as assessing the impact of IFRS17 are delegated out to consultants. “We are very comfortable with using external support because Chesnara, in the UK, is inherently built on an outsource model.Customer service is outsourced, actuarial support is outsourced, and indeed a lot of the finance function is outsourced, we’ve got this lean head office which is really just the top end of the process,” he adds.

“Sometimes I think finance has a role in almost every business decision that impacts the numbers, but I think where finance gets lost a little is where they take the wrong role in those decisions, and don’t respect the specialisms of other areas,” says Rimmington.

“You’re there to make sure financial discipline is being applied, but don’t become an amateur IT expert because you know a bit about IT, or don’t start telling marketing what to do because we’ve all seen adverts on TV,” he asserts.

Since taking on the top financial role in 2013, Rimmington has sought to ramp up the presentation aspect of the group’s reporting and management information, adding aspects of what he’d picked up in previous roles. “We modernised it, making it a little bit scorecard-based, and I think the Board clearly welcomed that,” he says.

“For the group to understand the financial complexity as the group was growing, you needed to understand what the company was going to look like on an solvency 2 basis and IFRS. But I was careful not to overburden it with all the bad stuff of a large company, like re-engineering some of these processes,” he adds.

In the time he has been there, Chesnara has performed well- the share price has almost doubled to around £3.70 even though the last full year pre-tax profits more than halved to £42.5m from £89.6m a year earlier. “Cash generation has been robust in choppy waters”- one of the strengths of the group’s business model, says Rimmington. Volatility in economic value- the other important metric- is well understood by the market, he insists.

There are still plenty of things that keep Rimmington awake at night- mainly around trying to address “almost every complexity” that comes with the life an pensions sector in an international business”, including forex exposure, but Brexit he doesn’t spend a lot of time worrying about, because despite  the international scope of the business, its structure means it is not overly exposed.

The biggest challenges come with the scale of the group, which is relatively small for the sector.  “It’s juggling issues like IFRS17- a huge project which will form over the next two years. You’ve got to keep one eye in that, to make sure it’s not stalling. You’ve got to make sure you’ve got the project in place- the foundations, the reporting.

“You’re then suddenly moving into an accounting period, so you’ve got your hands full with your accounts, your business plan is around the corner, and you’re going to your overseas businesses to understand their business plan better. So it’s this constant kind of close- almost micro management of all these moving parts and constant decision-making every day about priorities,” he adds.

Ultimately, Rimmington says the life and pensions sector is hugely rewarding because finance holds a wealth of information which is absolutely critical to running the business. “It’s probably more so than in many other sectors, because of the financial complexity of life and pensions. Understanding those dynamics is really important,” he adds.