MGA Whittles Group: Forty Years On and Stronger Than Ever

MGA Whittles Group: Forty Years On and Stronger Than Ever

With its three—armed approach to the insurance and Strata businesses, the MGA Whittles Group has been providing quality services to the people of South Australia and beyond for over forty years. The Australian Business Executive recently secured an exclusive interview with John George, the group’s Executive Chairman to discuss the success of MGA Insurance Brokers and Whittles Body Corporate in greater detail.

MGA Insurance
The original arm of the business was established in October 1975, placing MGA in its 40th year of existence. The company began after Mr. George left his job at South British United Insurance Company and established his own business, initially known as .I.R. George Insurance Services, which was the origin of MGA.

During this period there were only a handful of international brokers practicing. At that time, insurers began to recognise the benefits of distributing their products and capacity through brokers rather than the traditional method of employing sales staff.

There was no legislation covering the industry at that time, and it remained that way until the introduction of the Insurance Agents and Brokers Act in 1984, followed almost two decades later by the Financial Services Reform Act

“It is very much now a controlled industry,” Mr. George says. “A major percentage of wholesale products, being those commercial products, are delivered through the medium of insurance brokers.”

Insurance brokers offer the client a wide range of services, and MGA acts as the agent for the client rather than the insurer. Not all insurance companies can be all things to all clients, so many of MGA’s accounts have risks spread across a variety of underwriters.

We work for our clients,” Mr. George says, “and we will search the market, that we know extremely well, to come up with the best cover, the most competitive rate for our clients… It extends the reach of the general client, it gives that client access to the entire insurance market.”

It is not the broker that pays out on claims; this is the responsibility of the cover holder or underwriter. The broker’s responsibility is to make sure the client receives the correct amount and has secured the best deal on a particular claim.

“It’s been my experience that most clients need that security of somebody that they’re dealing with that which maybe has nothing to do with insurance broking, but they can trust. They are in their own businesses, do require insurance, which is a very important part of their business.”

“They are looking to have that responsibility handled by somebody that really knows what they’re doing and can protect their business for them. They pay a fee for that service and it’s up to us as brokers to charge the correct fee, which will pay all of our costs and give us a bottom line.”

At the end of the day the broker is judged not only on its premiums and fee, but the level of service that is provided for the client. It is often the ease of ‘you get what you pay for”, and Mr. George believes prudent clients understand this.

“MGA has always specialized in general insurance products. That’s basically everything but life insurance, superannuation and investment advice. We’re purely involved in property insurance, liability insurance and general insurance products.”

But there are particular areas of expertise For MGA. One niche market is in the rural sector, which covers about I % of the company‘s total premiums, where the company has developed a Farm Pack style insurance policy, the broadest in the marketplace.

Another specialist policy is in Strata Title buildings, of which the company has about 5,000 insured throughout the country. MGA also handles a lot of individual commercial clients, which range in premiums from 82k per year to $500k per year.

“In terms of retail products—that is retail, house and car: the mums and dads-that still forms an important part of our business and will probably make up about 20% of our total book of business.”

Via its underwriting agency arrangements, the group is also cover holder for the insurance market Lloyd’s of London, where it is represented by an agent, meaning it often places business into the London market. Lloyds is the underwriter for MGA’s Landlord Property Protection product, as well as some of its Strata Title insurance.

“The majority of our business will be done via the Australian insurance marketplace, but there’s also a reasonable percentage in place on the Lloyds market,” Mr. George says.

In 2012, MGA was selected ahead of 130 other brokerages by leading industry publication Insurance Business as Australia‘s number one insurance broker. This is an accolade Mr. George attributes to the decision, as the business started to grow, for the company to embrace a different model to lift it above its competitors, the result being a groundbreaking innovation in the industry.

“I‘m a great believer in the power of the individual,” Mr. George says, “and the individuals are out there [as our] representatives, in our branches, in our offices, out on the road. I realised that we needed to do something to harness their power…to bring them closer into the business, rather than working with us as employees.”

MGA Whittles Group Executive Chairman John George.
MGA Whittles Group Executive Chairman John George.

In response to this realisation the company designed the Portfolio Management System, offering some of its long time brokers the chance to own management rights over the portfolios they were managing.

The selected brokers Portfolio established their Management companies and employed their own broker assistants. The company then shared income on the portfolios they were managing.

“They actually became professional contractors,” Mr. George says. “Although in the strictest sense they are not franchisees, there are some elements of franchising. Much of the stresses of having a large staff, and large HR departments to manage those staff, have reduced significantly.”

“But importantly, it gave the individuals the opportunity to grow a business. It gave individuals the opportunity to build an asset, because those management rights that we granted them over those portfolios were an asset in their own right and are saleable. And in fact quite a few of them have been sold and changed hands.”

This provided MGA with a far more efficient way of serving its clients, providing its representatives with an opportunity to be in a partnership with the company whilst also running their own businesses.

“I think that was a turning point in our business,” Mr. George adds, individuals involved went up by anything from 50-150%. It was “when we produced that, we found productivity of the quite spectacular. That was the philosophy we adopted, and that’s allowed us to expand as we have over the past 40 years.”

The insurance market is constantly changing, and having seen plenty of takeovers in recent years, the marketplace is now much smaller than it used to be in terms of underwriters.

“Where we had dozens of underwriters in the marketplace twenty years ago,” Mr. George says, “now there are only a handful of majors in Australia, so the marketplace has changed.”

MGA has remained flexible, recognising these changes and working to benefit the client. In such a tightly controlled industry, companies need to have strict protocols in place to ensure compliance with government regulations, which is a costly endeavour

“The day of the small operator, I think, is coming to an end, because they’ve been costed out of the marketplace. That said there are some excellent small operators out there who are in niche areas, [and] we’re more than happy to embrace those people.”

In light of low interest rates, and the capital market as it is globally, there is plenty of money looking for a home and a return. Reinsurance has become an investment place for capital markets, as excess money looks for a home that gives the possibility of a reasonable return.

“I think we’ll see more and more competition coming into the market,” Mr. George says. “I think we’ll see more and more innovations as far as IT is concerned, which is certainly an area that we’ve focused on within our organisation

“Our systems, I believe, now are amongst the best available, some of them are fundamental industry systems, but on top of that we’ve built some excellent add-ons.”

In order to maintain its strength, MGA Insurance has taken measures to keep costs down, maximising not only the services it offers its clients, but also the return that can be expected for shareholders.

Whittles Strata Management

In 1983, MGA Insurance won an account through its chartered accounts. The new acquisition owned a Strata company called J.S.Whittle & Co, which was managing 270 buildings. When the company went up for sale two years later, MGA decided to buy it.

“That business has sat beside our insurance broking business now since that time,” Mr. George says, “and there are a lot of synergies in the business. Although the offering is quite different, culturally there are quite a few synergies.”

Whilst Whittles operates primarily in the Northern Territory, Queensland and Victoria, the entire MGA Whittles business in most instances will work out of the same offices, as they share a central computer and admin system.

Whittles is a portfolio-based business, meaning one of the Strata managers will handle up to 150 buildings. The manager will be required to arrange the Annual General Meeting and the secretarial and maintenance needs of the body corporate, as well as insurance claims.

“Once a year, at the Strata’s Annual General Meeting, Whittles’ appointment is laid on the table and if the people are satisfied with the deal that they’re getting and the job that our body corporate manager is doing, they’ll be appointed for a further term.”

This arrangement is based on the timescales of the insurance industry, where a broker will look after a policy for 12 months before a review is done. In that sense alone it’s an ongoing, portfolio-based relationship, creating a synergy between the two arms of the business.

Likewise, the Portfolio Management System that was introduced by MGA was replicated in the Whittles arm ofthe company. “We’ve had the same excellent results with that as we have for the insurance,” Mr. George says.

As the population of Australia grows, so does the popularity of Strata, which represents a far more efficient habitation option for some people, particularly working couples living close to a city.

Strata Title homes offer many and varied options for buyers. Some community corporations can produce up to five—bedroom homes, all contained within a corporation setting offering centralized resources.

“People are busy these days,” Mr. George says, “usually with two people working in the family, and they like to close the door and walk out and know that all of the maintenance and everything is taken care of for them.”

Mr. George expects to see further growth in this area, as has been evident in the European market where there is often a tremendous amount of high-density living close to major cities, mostly a consequence of a dearth of living space.

“I think we’re seeing it here not so much because there isn’t enough space, but because it’s much more efficient and affordable. I believe that will continue.”

Older style buildings in the industry remain something of a challenge, especially those intended to have a maximum 40 or so years of life. Over the coming years many of these buildings will be need to be replaced due to escalating maintenance costs.

“Ageing infrastructure, and fairly poor construction on some of the older buildings which were put up hurriedly back in the ‘60s, in the boom years, I think it is an issue for body corporate managers and owners, as the cost of maintaining these properties grows and grows.”

Dealing with these properties has also become a challenge for legislators, although a small amount of them have now been demolished, with new ones put up in their place. This particularly has an impact on Strata groups, which are likely to have many people as co—owners of these properties.

The Group

In terms of our relationships… there has to be a fundamental confidence between all the parties for this to work effectively and efficiently. We’ve enjoyed a great relationship with most of the major underwriters in Australia, and also the Lloyds market, that’s been very much important to us in growing our business.”

The relationship between the three major parties–the client, the broker and the underwriter—is the most important in terms of running a successful business. As broker, MGA needs to be on good terms with the underwriter, in most cases at a very high level, so that if issues do arise it has access to the businesses to resolve them.

MGA Whittles operates with a proud South Australian heritage, and has embraced the area as ideal for the location of its head office. Mr. George tells us how easy a place Adelaide is to get around, and that there is always great staff available.

“There was a temptation at one stage for us to move our head office to Sydney, but I’m delighted that we didn’t do that. I feel now that we’ve made the right decision. We’re very, very happy with the place… We’re not going anywhere.”

“Nationally, we do have around about 460 personnel and of those, around about 250 of them are domiciled in South Australia. So we’re providing jobs for 250 South Australians.”

The group’s impressive growth has seen it make a move recently into South East Asia, with MGA opening up an office in Phnom Penh within the last 12 months. “We’re now at the stage where our business is growing; we believe the group, about 60% of our national receipts are coming from outside of South Australia That part of our business is growing at the most rapid pace.”

The third arm of the business is the Millennium Underwriting agency, which began as a project to develop products. It has since developed its (JVW1 Farm Pack product, Strata Title Management product and a Property Protection product.

“[Millennium] very much is a part of our group, [and] develops specialized products. In terms of business placed, there will be more business placed through Millennium than any single underwriter, so it’s very important to us to be able to offer specialist products to our clients.”

Secret of Success

Despite its many years of existence, and the changing nature of the group, Mr. George is proud to say that MGA Whittles still has the satire culture to it now as it did all the way back at its beginning.

“Whilst employing Public Company Governance, we’re still very much a family organisation, and we have been successful, even through our strong geographical growth, of maintaining that family feeling of all of our people, and that is very evident at the national conferences that we hold.”
In fact, Mr. George insists that any member of staff, no matter their position, can walk into the Managing Director’s Office or the Chairman’s office at any time for a discussion. Not to mention the fact that each of the three divisions are run by one of the sons of the founding members of the company.

“Without that, probably we would be looking at becoming more corporate,” Mr. George says, “I think we would have to, really. But our sons share our vision and so we can see no reason why the business shouldn’t be able to continue on the same growth phase that it has over the last 40 years.”

The company has endeavored to maintain a growth of 75—10% each year, something it has been able to achieve through most of its life. As the company has grown, that 10% has represented larger profits, helping the company maintain its success.

MGA Whittles has also consistently looked for acquisitions to further strengthen the group. “These people have to be a good fit for us,” Mr. George stresses, “because you’re not buying j ust a book of business so to speak, you’re usually buying the people who are in that business.”

“[There’s] not a year goes past when we haven’t had something to do with an acquisition activity, and we’re finding now with demographics being as they are, that people within their businesses… that may be looking at retirement, they have no succession plan in place.”

“We offer an ideal track for them to be able to eventually exit their businesses, and also for us to purchase it, and we pay quite generous prices to those people. That’s a major part of our success strategy”

The Strata and General Insurance industries are not that large in Australia, so the group tends to know the companies that are around, and keeps an eye out for those which maybe a good fit for acquisition.

“It costs nothing to talk to people,” Mr. George says, “you’ve got to keep your ear to the ground. When an opportunity comes, of course you’ve got to do your due diligence, but at that time you’ve got to be ready to go.”

“We’re finding we’re being approached these days; we’re becoming a broker and Strata Management Company of choice for people to be associated with.”

Some companies will be keen to get under the umbrella of a big organisation, and some will want to sell. Mr. George’s advice to companies looking to be involved with MGA Whittles is to keep communication lines open within the industry and keep an eye on what’s going on.

Order of Australia

The success of the MGA Whittles group has allowed Mr. George to make a difference in the lives of others, as well as earning him the highest recognition in his field.

In 2000 he was introduced to Geraldine Cox, the President of the Australia Cambodia Foundation (ACF), who was experiencing difficulties handling the organisation’s back office. As a result of this meeting, MGA became involved with the organisation.

“I served as treasurer Security and then Chairman of the Australia Cambodia Foundation for a total period of about fourteen years. I’m no longer the Chairman of that association, but I‘m a trustee of it still.”

As a result of his ongoing work in Cambodia, particularly that of providing education for orphaned and impoverished children, Mr. George was awarded the honour of CAM (Medal of the Order of Australia) in 2013.

Mr. George worked primarily with Sunrise Children’s Villages and a charity called AllKids, focusing on the education of impoverished children. There are huge numbers of children in Cambodia who will never have the chance to go to school, with many reaching their teenage years still unable to read or write Khmer.

“Those kids have got no hope,” Mr. George says, “and these are the kinds of people that you see ending up being trafficked and ending up in these dreadful camps. It’s really sad, and education of course changes all that.”

Further work included the building of a health centre for Children with HIV, which Mr. George oversaw most of the admin work for. For his work 011 the centre, he was awarded the Cambodian Gold Medal, presented to him by Prime Minister Hun Sen at the centre’s opening.

Back at home, 2013 was also a good year, as Mr. George was awarded the Les McKeown trophy, the highest accolade that can be given to an insurance broker in the country, granted by the National Insurance Brokers Association of Australia.

“You don’t actually go out to do it because of that,” Mr. George says of his recent accolades, “but at the end of the day it’s nice to have that recognition, and hopefully the recognition encourages others to work harder and do better.”

Prime Minister Hun Sen and MGA Whittles Group Executive Chairman John George.

Prime Minister Hun Sen and MGA Whittles Group Executive Chairman John George.

Thought-Leadership

I’d never even heard that word until about a month ago,” Mr. George admits with a laugh, when asked about his opinion of thought-leadership. “But I think the reasons for our success are the empowerment given to our good people. We’re rising to $400 million in gross receipts nationally, that’s 37 branches, so it’s a big business now. “

“You’ve got to have some courage to change things. If you believe in what you‘re doing, you can do that. It took a fair bit of courage to introduce our Portfolio Management System. We had a system here; we were a conservative, well—run company, but we wanted to do something different, we wanted to be innovative.”

Despite the cost, the risk taken by changing the system paid off with the increase in staff productivity. As a result the group ended up benefiting massively from this, and doing so with significantly less management input.

“Don’t be afraid to innovate,” Mr. George adds. “And the time to innovate is when things are going really well. And you’re feeling comfortable. When you’re feeling comfortable and things are going well, don’t sit around and pat yourself on the back and think you’re arrived, because you haven’t.”

Mr. George believes in any industry there will be new challenges on the horizon, and that laurels should never be rested on. When business is good and there is time to think, it is usually a good time to look for the next big idea.

Much of MGA Whittles” workforce has been employed for over 25 years, having grown with the company. In that respect, the group tends to have a very low turnover in staff.
“People join us,” Mr. George says, “and they tend to stay.”

“It is very, very important to value your top people, and to continue to encourage them, because at the end of the day you can’t do it all by yourself. Your good people, they need to have that feeling of family and that feeling of ownership.”

“It’s important to share with them the knowledge of what you’re doing in the business, so they have a feeling of what you as a manager have got in mind in terms of growing the business, so they’ll then automatically feel a part of that.”

But perhaps the true secret of MGA Whittles’ success is that the group‘s partners are in it because of their affection for the business, in contrast to some people in other organisations, who might be motivated only by money. The money and success come as side benefits of working in a business you love.

“If you’re determined to succeed, and you have the patience and the will and the persistence to succeed,” Mr. George concludes, “ultimately you’ll get there.”

This MGA Whittles business profile has been made possible by the generous support of:

Allianz
CGU Insurance
MGI Adelaide
JL & JK Bevan Master Plumbers
Hunter Premium Funding
National Transport Insurance
Austbrokers
Higgins Coatings