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Insight interview – Back on his patch

There are many instances in business today where finance directors move on to become chief executive of a plc. Often the promotion comes with a steep learning curve and is something of a dramatic realignment of the FD’s stance in the world.

In the past, FDs might have been able to busy themselves with nothing more than the technical issues, but once they take up the position of CEO they have to assume the full burden of leadership.

There is no hiding behind figures. CEOs can’t get away from the fact that they are expected to set the course and steer the ship. And for most FDs this requires a rather severe change of gear because being the lead strategist for an organisation is not a role to which they are accustomed.

However, when Otto Thoresen, former finance director of pensions and investment group Aegon UK, took over as the company’s CEO on 4 April this year, he found himself returning to more familiar turf. For, unlike most FDs, Thoresen is an actuary by profession, not a chartered accountant.

Moreover, he is a rather unusual actuary in that he discovered early on in his career that he had a flair for communicating, which made him gravitate naturally towards marketing. So, while a good number of FDs with a highly numerate background find marketing a bit of a quagmire, Thoresen is happiest analysing which plays are most likely to work in which markets.

Just how central this is to his makeup is evident in the fact that prior to becoming FD of Aegon in 2000, Thoresen was group development director, with responsibilities for the strategic development of Aegon. He retained these responsibilities as FD, as well as taking on the additional burden of handling investor relations.

The surprise, then, in Thoresen’s story is not so much that as FD he should have been appointed to CEO but quite why David Henderson, the outgoing CEO, should have chosen to burden his chief strategist with the FD’s role in the first place.

Thoresen shrugs off this anomaly and explains that what Aegon needed at that time was not so much an FD but a skilled change manager who could double as a corporate finance acquisitions specialist. Why? Because the whole industry was going through a tremendous upheaval at the time. Equities were going south at record speed. Public confidence in long-term savings of all sorts – apart from bricks and mortar – had all but disappeared, and the government had decided that this was a great time to drop its stakeholder bombshell on the industry. The 1% charge cap on stakeholder policies redefined, at a stroke, the charging structure that the industry had worked off for decades and unleashed a scramble across the sector to cut costs and drive through efficiencies.

As FD, Thoresen presided over a massive efficiency drive at Aegon that saw it cutting about £80m out of its operating expenses over the past three years. “I had full responsibility for the usual FD functions, including responsibility for regulatory reporting and going through the Q&As with analysts. But my key role was to get the business ready to deal with the changes the industry was going through,” he recalls.

Thoresen relied heavily on his number two in the finance function, Mark Laidlaw, a chartered accountant who has now become FD, as far as the deeper technical issues were concerned. “Mark was always significantly stronger than me on technical issues, so we formed a great team,” Thoresen says.

In particular, the two built up a strong relationship working through a series of acquisitions that Aegon undertook during Thoresen’s time as FD. “The hours you put in during an acquisition can be long and challenging. You really get to know the people you are working with in an M&A deal, and Mark and I know each other extremely well. We trust each other’s judgement and that is the bedrock for any relationship between CEO and FD. It puts us in great shape going forward,” he says.

In Thoresen’s view, the industry faces challenging times. Aegon is in good shape, having increased its pretax profits by 16% in 2004 by comparison with its 2003 full-year results. However, he has to anticipate the likely answers to some key questions that will determine the shape of the industry for the next few years. For example: what will the medium- to long-term savings market look like in 2010? What will channels to market look like by then? Will government move to make pension contributions compulsory for either the employee, the employer or both? Will the industry and government ever be able to restore the public’s confidence in long-term savings?

According to Thoresen, he and his team have worked out possible scenarios and answers to all these questions. However, he plans to hold back on any further acquisitions until the future shape of things becomes a bit clearer. “For now, we see some substantial growth opportunities in our existing markets, so organic growth will be the most natural route for us,” he concludes.

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