Ep299 Dan Topping CEO B.P. Marsh: Small begets Big, Big begets Small

I'm Mark Gagan and you're listening to the Voice of Insurance podcast. Produced an association with Advantage Go. Now part of Sapiens. Pick and choose your own Best of Breed in Short-Tech and Data Providers with the Sapiens Advantage Go ecosystem. The great cliche about our sector is that while business trends come and go, it's the people who remain the constant. Today's guest is someone whose business follows this philosophy to the letter. Dan Topping is the CEO of London-focused publicly listed private equity firm BP Marsh, with just under 20 years in the business. The firm he leads is a household name in the London market, with a 30-year, often idiosyncratic pedigree backing entrepreneurs in the intermediary segment. Countless brokers and MGA's, including Hauden and Nexus, have benefited from the investment and counsel from this single institution. Given the highly focused nature of what BP Marsh does, Dan and his colleagues will have seen almost every early stage investment opportunity in the London market of the last 20 years. That gives a kaleidoscopic perspective, and that knowledge and understanding seeps through every pore of Dan's being. The prime job of a podcast like this is to help tease out specialist knowledge accumulated in the market and share it with you, the listener. I've known Dan for almost all of his time at the firm, and that made this interview really relax and much more revealing than most. If there ever were any trade secrets about what has driven the compound growth of this impressive, highly focused business, after this podcast there won't be secrets anymore. If you want to know what makes entrepreneurialism and specialty insurance sector tick, this is the place to come. Together we'll examine some of the surprising trends Dan is seeing in what many would view as an ultra-consolidated intermediary segment. Dan is as eloquent and relaxed as he is knowledgeable and the time will fly by, and perhaps you too will be inspired and emboldened to death strike out on your own entrepreneurial journey. cliches come about because by and large they're expressing an underlying universal truth. A quick listen and I think you'll agree that Dan is living proof that it really is the people that make the market what it is. Enjoy the podcast. Dan, welcome to the Voice of Insurance. Thanks for having me. Good to see you again. Anyone who's out there who's listening who doesn't know you, Dan, why don't you briefly introduce yourself, run us through your career to date, and I suppose I should probably just go and ask you the thing that everybody asks each other when they meet each other the first time in the insurance industry is how they got into insurance. I suppose everybody got in a sort of esoteric way and a. Are you not in insurance really? Are you? I'm really, I'm an observer rather than a participant, but my background I started after university and accountancy firm on the compliance side, which was fun to an extent. Was it fun? Well, I got quite good at billing. I probably shouldn't say that, but it's all about billing in the services sector. I was good at that, but I thought there might be a big deal. I suppose you were billing your hours and you were ahead of budget. Exactly. But that was 2005 and then that was in the beginning of the private equity boom and it looked quite appealing. So I applied for a job at BP Marsh and at a major bank and got offered both jobs on the compliance side. The bank was about 400 people in the team and at BP Marsh there was about nine. So I thought I might stand a better chance of progressing at BP Marsh, which I duly did and joined as a assistant company secretary, but this is where it slightly deviates from a normal career path. It's within six months I was working in the boardroom with Brian Marsh and he said, "Oh, I've got good news and bad news for you." Well, I'll take the good news and he's, "You're getting promoted." So as a Yorkshire man, if you're getting promoted there's no bad news following on from that. We're not giving you a pay rise. Well, the bad news was you're not getting a pay rise and you're now my PA and that's what I did as Brian's bag carrier for two or three years. But the exposure was tremendous and I expand into my career. Brian's not in his 20s and he wasn't then. He sort of stepped back into a chairmanly role as the team around and built up and from there became an investment director, became a board director, then chief investment officer and then more recently CEO. And for anyone listening, Brian Marsh's obviously the name is still above the door and he was broke wasn't he? But the broke was Nelson Hurst back in the touch. Then it's difficult to remember exactly. It was Nelson Hurst and Marsh. So it was. Nelson Hurst and Marsh, that was the March in that. So that was the first one backed by private equity and Lloyd's as by charter house. He built that up, was going to list it, but then City Corps came in and bought the whole thing for cash at Claysing, which was probably quite appealing in 1989. But Brian didn't last long as an employee of a US broker unsurprisingly and was delighted with the cash, didn't want to go back to client facing roles. His background was ENO, particularly Lloyd's brokerry ENO. As I always remember, just as Nelson Hurst obviously must have been just after Marsh left so that the Marsh wasn't part of that queuing up in anywhere in the financial institutions market. There was Nelson Hurst brokerage in front of you in the queue. Yeah. And so after five years of non-compete, he set up what is BP Marsh and partners in his flat in South Ken with people he used to work for him or work with him coming for funding. So David Houd and what's one of the first? Houd and Pangbourne and Hous. Yeah. 50,000 pound investments. And that was a 21 year investment. The team at Bestow came to him and then built it up in a, again, not typical fashion. And as well, it was organic. It was all organic. So we didn't raise funds. We've never had that GPLP structure. Any investments made? So it's all been reinvested profits from the original. Exactly. That's amazing. But the business was floated on the aim. In 2006. And since then we've floated up 40 million and a net asset value of 40 million and that's a few decades ago now for 20 years or so. And we're now net asset value of 350 million in market cap of 250 million. So. Wow. So anyone out there, we've basically just described it for anyone who doesn't know BP Marsh as a business. You're a specialist private equity firm. You are listed on the aim list of the London Stock Exchange. We've been around for about 30 years and listed for 20 and you've been around, you were how long? 07, so. 07, yeah. So nearly pretty soon after you listed. Yeah. But you specialize insurance effectively. Insurance distribution. So we've got a wide a mandate for financial services, but we're 99% insurance distribution and that's certainly where we've had our most successful investments. But not balance sheets. So yeah, you can make your money go further. Yeah. Balance sheet light, whatever it's called. I think that's worked. Well, we have the constraints of being a smaller investment company when we started, but the approach in terms of taking long term minority investments is unique, I would say, and the structuring certainly is and that's what allowed us to carve a nation. That's where we are today. So if someone knocks on your door and says, right, I've got this great I live for business. I've been in the industry for X amount of time. I want to start on my own and I want to do something. Everyone knows they should talk to you for one because you've been around 20 years ago. I don't think there were many people doing exactly what you were doing. What do they have to say to really beat your interest to say, oh, this is going to be perfect for us. Generally speaking, not oversell themselves. So we kind of know what the sector should look like. So if they say we're a specialist in marine wholesale at our business plan is to go for 500,000 to five or 10 million in five years, we know that's great. But they can't say we're going to go from north to 100 million in three years. We would question the ability of most people to deliver that. And the suppose also they've come to the wrong place at that point because they're going to need much more capital. Yeah, we're long term. We don't really care about turnover without profitability. Our whole structure is to move businesses towards cash flow. Generative. So it's relatively simplistic. We should see a business plan for a startup that says, well, lose money in the first year, break even in the second to make profit in the third year. So the first sort of check that you sign, what sort of number does that want? Up to two million on the startups. Our view is a minority position in an MGA or a broker should be able to get off the ground with up to two million. I think one's very doable, but two gives more headroom. But where we differentiate, we follow the money. So a lot of P investors, the first checks, the last check, we like giving more money to maintain our position. So Nexus, for example, what Ken chose was when we existed. We bought 5% for one and a half million. Primarily because Nexus didn't need the cash, no one sold. They'd been approached by more typical private equity, but weren't sure about it. And they took enough money from us that if they didn't like it, they could just give it back. And then after nine years of investing, we'd invested about 15 million. And we're about 19%. But the business had grown from 50 million to 650 million and 2 million or so to 20 million of EBIT. So that was a good one for us. The first example and the one that should always be on your calling card would be that fantastic Howden, Pangbourne, Slash, Hyperion investment that you held for over 20 years. Where did you finally leave? General Atlantic. General Atlantic. I was thinking was it did hang on for the Canadian pension fund? No, so we would due to probably leave in '08 when 3i came on and for a variety of reasons we stayed in as the minority invested to 3i. But with more typical private equity, 3i then exited in 2013, 5 years after they'd invested in at that stage, you could see the trajectory of Hyperion. They were in talks to buy, RK Harris and a tremendously good business, but it outstripped our balance sheet. Brian in particular had the conversation with David and said look you're going to buy this business. It's a great business. It's probably the best wholesaler in the market. It will go well. But if it doesn't, 3i have said they're not committing any more capital than they will leave. Our balance sheet is such that we couldn't. So if there is a misstep in a channe situation, why don't you clear us out by RK Harrison and don't look back and clearly that's what they did? You have to have the small who have to pass it on to the medium and the medium then have to pass it on, particularly because it doesn't make any sense otherwise, as opposed to your medium now than you were. Hopefully. But we still like the smaller stuff to be fair as a focus. I think we can take it further. Because then you can actually go and have lunch with the person you're investing in. Is that sort of the attraction you can get to know them? Everybody says it. It's a terrible cliché, but unfortunately it is true. It is all about the people in insurance. Everything else is kind of secondary to help the people. And if someone's going to take the ultimate business risk of starting up on their own, having a face-to-face conversation with them and explaining what the risks are, what the upside is, what BPMAS does and doesn't do and what our focus will and won't be on, especially with the early stage stuff, we can focus the attention on cash flow, governance, systems and controls. The kind of dull stuff that an entrepreneur doesn't want to focus on. Because you're pretty good at it, it's because he's done it before. So we've definitely seen all the pitfalls of it and the benefits and it allows the entrepreneurs to go out and produce the business, which is what they're good at. Yes, and I suppose that on and off and your representatives on the board. Yeah, we always have a board director. And that's probably actually added value for them, isn't it? Ultimately, you know, in a bit of a pain in the waltz, it's sometimes. But then you're right, when you're making the right noises about, you do know the FCA could call and you'd better have all these policies in place and you'd better know what you're doing, etc and all that kind of. So you're quietly reminding them, well, they're busy sort of rampaging around the world getting business. Yeah, I suppose Brian and I sometimes don't mind being right, but that kind of sounds sometimes rub people up the wrong way. But I think partnership approach with these people is such that we're all focused on the same equity value at the end of the day. And ultimately, if BP mass does well, the management shareholders are going to do even better. Because you've got this evergreen capacity, you have to keep sort of every seven years, get a new fund and fund number one, fund number two, fund number three and you know, all this Roman numerals. You don't have to worry about that. So do you have a typical holding period or was it just as basically just depends on how well it goes and how fast it grows? I mean, the average is about eight years. If you take out the anomalies at the bottom end where we've turned them around quickly. But I personally think that our style of investing being able to offer that eight to fifteen year window of investment really gives them the headroom to grow a meaningful medium sized SME business that ultimately is valuable to a whole world of acquirers, which is what you want when you're considering an exit. You've been at BP mass for 20 years. The sort of things you're offered, the sort of businesses that are being formed and requiring capital, have they changed over that period? It's more cyclical. I wouldn't say it's necessarily changed. Have they become more sophisticated? I wouldn't say they become less sophisticated. I'm going to be diplomatic, but again, it's that key share about the people. The market, I would say, you know, is an observer for 20 years, but looking into it for pre-there tends to be cyclical, whether it's hardening and softening. That seems to be a continuation. And it was actually Colin Bird for Bessos saying small begets big, big, big, big, small. And I think we've certainly, if you look at the brokers, when I started BP mass, they used to do the top 50 lawyers brokers. And they're all mid-size. That's got to have shrunk now in terms of the mid-market because they've all taken on PE or been consolidated. And I think we've gone through that first phase. And certainly from the direction of travel of what we're seeing in terms of new investments on the broken side in particular, there's a demographic that are looking to start up again. And I've looked in the mid-90s when Marshport, such work, A on board Alexander Howden, they're all consolidated and out of nowhere, suddenly a whole new vintage. Yeah, I was part of that wave. And of course, that's when David Howden saw stuff on his own. I thought it was crazy because you couldn't be more right because they're just certain type of people who will not really thrive in a large and a very large organization. They need to go and do stuff on their own and they need sort of being charged of their own destiny. And so, yes, I thought that all the consolidation was done by the A-2. A-2. And that was completely wrong. We hadn't even started. But there was this guy, David Howden, who was able to build a business that's substantially challenging with the top three, top four, which he was literally sitting there with his labrador dog and a small office on St. Dundston's Hill. That time, I thought it was crazy. But there you are. I think it's loyalty to the client. And I know the strap line, I know how it started about being unencumbered with clients, but they knew they would get clients because the reason they set up was to look after clients and they didn't necessarily think the best service was being offered. And I think that's what's driving it now. The service can be improved. No, I was part of a business that was a customer of David Howden and everybody absolutely loved him because he gave the best service. This was with a Spanish who could be quite difficult to work with sometimes. Just bit demanding and, you know, well, high maintenance, sometimes some clients. But he was fantastic. He had them eating out of his hand. Brian had said that's a function of the education he got at Nelson Hurston Martin. I imagine. No, it's absolutely true. Certainly actually, from the Atelier of the Westerners, he did thrive in all the Latin American Spanish market. He said it's the people then. So have the people changed? Are they older or younger or? I think the people fundamentally weren't being the same in terms of their approach. I think it's more market demographics have changed. So I was when I joined BPMR 23, directed quite early on. And while I was facing them, there was a lot of people later in their career and early in their career, there wasn't much in the middle in that sort of 40 to 50 bracket. And now I think those guys that were in their early 20s, mid 30s are now in a position whereby they're very experienced, they're very well thought of. They've seen their bosses do it, see the consolidation that's taking place and actually think, well, there's never a good time set up, but now's as good a time as any. So that's what they're doing. We back to Czech called Alex Taylor, very recently, who's JLT Miller. He decided he was going to set up on his own, which is the ideal candidate for us where they've already decided to take the. Super risk. And then you've got that confidence within them. And they think, well, if they're going to do it and they're going to do it anyway, they'll help them to earn the, you know, as a specialist in the energy sector, which is really being consolidated. And therefore you've got to think that he's going to offer something different to what's the name of that broker Ventura. And of course, not bad to have a tailwind while you're at it with the energy transition being quite a nice tailwind to have. Yeah, say we're going to change every power station in the world probably in the next 10 years. You would think the insurance spend an energy is only going to increase. Absolutely, absolutely. Obviously, you've been involved into media use of all kinds, including the ones that do the underwriting, as you mentioned, with Nexus, which is a holding company called Kentro's Net, but another good investment for you. And of course, David Adam had dual and CFC and CFC, of course, which was just an extra bonus that came in the serial packet. Click for Qatar as it was. Not a bad thing to have, actually, small holding in that as well. What about that? The NGA. We've been through a real boom in MGA formation, or it certainly feels like it. Is that coming to an end? Do you think? There's a dynamics within that marketplace because obviously you must see, again, you see a lot of MGA formation and then coming to you and asking for help. Look, I mean, when I started at BP Marsh, M.J. was a dirty word. There's been a bang over. Yeah, the sort of agreed wisdom was it was broke as getting into underwriting, burning the capacity for three years and then moving on and writing for commission. I think that you could say that there's some truth to that, but I think over the years, the reality is with regulation, capital constraints where underwriters would have reached a ceiling of their career in a large corporate or a large syndicate and gone off and set up their own managing agents, but only right 50 to 100 million year and year after. I don't think there's the appetite for that as much as there was. I suppose that minimum ticket price for entry into law has gone up by then and you can't really do that anymore. So the only natural alternative to that is setting up an MGA. And certainly we've definitely seen that in recent times, for example, we factually is a renewable and non-renewable power underwriting agency vault that we backed in its active underwriter from the Traveller syndicate, Chris Allison. And when you reach a ceiling as an active on a lawyer syndicate, naturally 20 or 30 years ago, it would have been sea Allison and others that's unlikely these days. So setting up an underwriting agency where you'll see you've got your binding authority that allows you to go out and assess risk as close as you'll get, and I think that's the direction of travel. I think there's a balance to be met because I'm hugely fond of the tradition of loids and you wouldn't want to see it shrinking much further in terms of underwriting, scale or caliber. There have been attempts to shrink that ticket size with a syndicate in the box and other things. But it's not easy, necessarily. It's easy to blame loids for what it does, but I don't think it's just a function of regulation and the cost of capital. And they're just reacting to it. And they say it's much easier for us to manage the market with a syndicate in a box going to 100 million full syndicate, 250, 500 million. It makes sense. But if you're going to stick at 100, it's sort of, I might as well stay with an MGA. There's no point. Yeah. Because I can get really solid capacity and I can get multi-year capacity as well if I'm good enough. And then of course, you might, there's other more permanent capital that you can have a cap tape. But balance sheet risk in the portfolio now with our American investment, XPT, which we back to the start up. It's now over a billion premium income. But we've set up a Bermuda and sell captive with the management and an external investor to participate on some of its underwriting programs. I would say it's a fairly modest participation for us in terms of it. We're kept at five million dollars. And you've seen that as you want to make underwriting income, what you do because it's a necessary evil that you have to get involved in to show skin in the game to therefore get the other capacity for us happy. But when it says necessary evil, I think it's a natural progression, especially on the US market where you are seeing these MGA or wholesale broken groups, big to small participating in risk. And I think it's just natural progression. They want to grow. How do you grow? Have capacity for areas that you want to grow into. If the market's slightly lagging behind in its understanding of that by just using market-wide analysis, not that specific area that's underwriting, providing your own capacity on a reinsurance basis makes sense because the US market in particular, but I think UK and rest of the world is developing does have a huge fronting market. And therefore you have the fronts if you can provide the reinsurance capital or capacity, partially yourselves and partially with third party reinsurance, then it kind of makes sense. And I suppose you can gain more comfort over time that you've been doing this for nearly 20 years. You can sort of get a better feel for this. I think we never look to do direct balance sheet risk because we do have a pretty strong portfolio of underwriting agents. Yes, and your capital doesn't really go very far. There are better people out there than us for allocating capital. So we're good, hopefully, picking entrepreneurs in the insurance distribution space and supporting them with capital. That's what we should stick to broadly. Yes, so we've seen this trend and sometimes it's putting new language on things that have been around forever. But the idea of the risk allocator, perhaps being the MGA, the risk allocator, and then being a capital allocator that you're backing the risk allocators and you think this is a permanent feature that's not going to go away. We've seen one test case for it. That's by a leader in the market in insurance who's done that. And if that works, you can see the direction of travel. I've said, well, we've got this pathway to follow. It's less than successful than people might take a different view, but certainly the theory behind it seems pretty strong. And therefore, if it works, it being insurance a lot of people will copy it. What about evaluations? And it don't. It would appear that exit multiples have taken some of their froth off that this is a pretty good and pretty healthy. But is that just good thing to see that there's slightly more sustainable from where they were? There were some kind of quite blowout sort of exits. Well, it depends if you're talking to me as a buyer or a seller. Obviously, if you want it to be nice and cheap on the way in and very expensive on the way. Yeah, well, you've prepared to pay for something. Isn't necessarily what you've prepared to sell it for. But I think multiples are pretty strong and remain strong. I think the reality is the market's been consolidated. So if you think about it, there were high multiples for good, fast-growing, profitable companies by virtue of them all being bought. What's left? If it's not trading at very fast growth, good margin, it won't warrant a 15-glass times multiple. It will trade up less than that. If you still deliver growth and a good margin, you'll get that multiple because that's what people are looking for. But if there are fewer of those companies around, the average multiple will trade off. Is it much more just people getting what they pay for? Yeah. I suppose there's always a function of interest rates on the cost of capital going up and down as well. The reality is that insurance is a pretty solid sector in terms of ability to deliver growth on margin, in particular, on distribution side. So if you can deliver 20-30% top line growth on a 20-30% margin for a 3-5 year period, you're in a sector that will always come under a higher multiple, especially when you've got renewal rates at 75-95%. In general, in the aggregate over the last decade, we have had a nice secular re-valuation, should we say, "Well, I don't want to put words in my mouth." But this is the way I'd see it. We've had this secular re-valuation of the world. The financial world is the ones that are not you that have come later to the party have thought, "This is really nice. These intermediary businesses are wonderful because of this fantastic recurring income. They have lovely 90% renewal rates on a book of business. So I can see that stretching out long into the future. Of course, they've had a growth rate, really healthy growth rates. To that, I can see that they're profitable. The cash will come in year after year after year and hope, and they'll be more of it. And that thesis has been accepted. That means that people have been willing to pay more for those same assets. There would have been way cheaper ten years ago, would you say it's a secular change? I have permanent change in the way that people view these assets, but before they just didn't really know enough about them. I mean, you already knew the secrets out, that was it. To an extent, certainly BP Marsh did corporately, but I think it's more a function and they get a good kicking out of the time. But the FCA or the FSA coming in when it came in mid-2000s brought in systems and controls compliance and pre-that. I suppose what they were quite for us evaluations before that. It was all done on revenue multiples because a lot of brokers anecdotally were more akin to lifestyle businesses and they ran at a break even and they were getting tremendous investment income, which would add to the bottom line. But if you're a professional investor, you're looking at the recurring EBITDA or profitability, not investment income to drive profitability. And as the sector's probably matured, I don't know what the right term is to try and avoid upsetting people. But to be fair, the margins have gone up as well, so the valuation ought to go up. That's it. They're better run now. So before the margins were low, so it was a revenue multiple. Now it's profitability multiple because the margins have gone up. So I think that's a function of why. So it's again, getting what you pay for. Yeah. It's just recognizing the fact that the money is there, so therefore it's worth more. Yeah. So the margins increase, profitability's increased in a very low interest rate environment up until recently. So you look at it as an outside and go, "Crykey, they're very profitable or very high margin and they're not reliant on it." And we get growth as well. Yeah. So what's not to like about this? Yeah, so the secret really is out. Yes. I'm sure obviously you get lots of frogs coming up to you and saying, "Please kiss me." And they don't all turn to handsome princes. What's the most common reason for you to say, "This isn't going to work." You know, you need to sort of end the conversation. The proximate cause is always the people dimension, but there's a few tributaries that spring off from that unrealistic forecasting concern over the team, all the individuals ability to be comfortable running at their own company. So sometimes we'll get people that come to us and we'll say, "Look, you're a tremendous specialist. You're well thought of in the market. You'll get the client backing, but this is a ferociously high risk that you're going to take. Do you actually want that?" And just saying so, you do realize that we're in it for 30% and we've set aside this money. If you burn through our cash and don't achieve what you said you're going to do, any further funding from ours is going to come with terms that are probably less polite. Well, as much as you've been to that, you have to control the whole business at that point in which case we don't want to do. Which we don't want to do. Yeah. So we'll never do that. So in those circumstances, we try and usher them to our portfolio companies and say, "Why do you even speak to Smith or Brown at XYZ Insurance Brokers?" Because you might sit well there and they'll be able to give you a downstream company or equity participation and the smaller end where you can spread equity quicker and easier without having private equity and majority control. Because if a majority control business, they're not going to be huge fans of dilution. Whereas if we start at minority, so I think we started in howden at 30 and by the end we're about 8%. And if you look at that model, the employee ownership was key and then they brought in private equity on the back of that. And we just like having our 20 to 40% shareholding and management getting the rest. And if we start at 30, whilst we go market ourselves, we do dilute for growth to allow other shareholders to participate. And I think that's where our model differentiates ourselves. It's just big enough to kind of get out of bed for, but not so big that you get anywhere near being the boss. Yeah. I think going back to the question about why we turn them down. It is the people, but it is either the people who got unrealistic expectations or we would feel pretty rum suggesting that they go out on their own. If we don't feel in our gut, it's the right position for them. We spend all our day looking at business plans and cash flow forecast. So thankfully, because we're so focused, we kind of have a good appreciation of what a law is broke. Business plan should look like. Yeah. What about technology, you know, with you, it's all about the people. We've had this amazing phenomenon in the last 10 years. It's been, I mean, over 10 years now of insure tech, which has really unleashed the tidal wave of opportunity, but and investment and excitement, attracting all sorts of people who wouldn't thought about insurance before into insurance to sort of attack some of the problems of insurance. Is it right for me to say that there's not really been for you, you know, you'd much more going for the traditional? Before I go into it, it's a function of our investment appetite and balance sheet. So we don't have the freedom to say, here's 10 or 20 million. There's a three year run rate of burn through that. We focus on profitability and certainly on that from what I can tell is a distant observer of the tech companies that you want to clear pathways to sort of year two year three to be pretty exactly. And that's not the model on the tech side. So we've always known that, but also when something comes to us because of our focus, if we can't immediately see it as applicable to our portfolio, I that's such a good idea. Even if we don't invest, can you go speak to our 22 poor. Because they should all buy your product. And to be fair, there's only been one which came to us that I thought was tremendous. But unfortunately, it was so good that it became cash flow positive and didn't need our money. That's the answer. I suppose alongside all that in short tech and everything else, perhaps when Brian first started, was sort of the only show in town or he probably wasn't. But certainly there were many people doing what you do. And these days, I think there is more of an ecosystem of businesses that are there to help start ups. Does it affect the way that you operate and where do you think you feel it's more competitive now? It could be. I mean, our starting point is we don't participate in an auction. So I wouldn't know necessarily. But what I would say is that I think for the good, there should be more options for people start up. We absolutely want more entrepreneurs because even if they don't come to us, it's okay to be proven wrong every now and again. And we missed that one. You know, we didn't sign the Beatles. Yeah, we can't make every investment and we can't get every investment right. But I think having optionality is what we should offer. And that's when people come to us. I don't say you should do it because we're the best. It's we think with this option. And this is what we offer. I think where we differentiate certainly against the incubators and the more structured early stage investors is that they tend to want a majority position. Whereas that's an anathema to us. We want absolutely no control minority position because it aligns interest better. And I think on the MJ side, there's a whole universe of external capital providers for start-ups that do things differently. We don't bring in services underwriting capital. capital, or any like that, we're a pure investment capital with governance oversight and just focusing on the business plan. Yeah. So one of you on the board helping things that need to be done, but at that level, not at micro levels, say, "Hey, we plug in. You don't even need your own desk. We've got desks for you. We've got computers and we've got systems all ready to go." And I'd like to think conceptually what we provide by having that balance sheet support for a startup is if an MJ in particular gets its capacity in the early years, it doesn't need to write business that's questionable because it needs the cash flow coming into cover its costs. We can cover the costs. We're agnostic about what they're underwriting. We leave that to them in the capacity provider and such that when we do our due diligence and make investments, we know that they've had due diligence done by the capacity provider on their underwriting plan and we just kind of piggyback that to an extent and have a total alignment of interest that if the underwriting capacity has a business plan that goes to 50 million premium, we can provide the working capital to get there. And there's no question marks over writing business that if you had money in the bank, you might not take the risk on. Yes. No, that makes a ton of sense. And actually, probably on your own capital allocation skill is getting better because of course you have actually allocated capital to underwriting to look at those numbers and project to combine ratios of people planning to write to. Then I suppose you get more of a feel about what's realistic as well on those. Yeah, generally speaking, you do that. You get more than the old one, but the ones that go to the moon quite quickly and that's tremendous, but we're not backing the unicorns or anything. We like steady, understandable, uncomplicated growth. There's a question for you as someone who's very much long, the insurance industry. Yeah. There's nowhere to hide. In that sense, we had this recent gyrations. I mean, it's not my favorite. Love's getting excited about things, particularly perhaps on the other side of the pond with this sort of AI wobble. I suppose it's fundamentally illustrative of a rational fear. It's all about fear and greed on the market in the short term, isn't it? But how rational is the fear? I'm talking about the sort of gyration in a lot of the intermediaries share prices. Obviously, the really, really big ones. You know, quite a substantial daily falls and value because of somebody putting insurance into the media on chat GPT or something. Yeah, I saw. What's your view on that? Do you have any concerns or worries about AI eating your lunch in some respects or the broken industries or the MGA businesses lump? Look, dealing with that fine. If it does or if it can, then it should. We shouldn't stop progress. You know, change is the only constant, things like that. But that being said, going back to that specific thing where an article went out about chat GPT could do insurance and global brokers stocks dropped 10%. As an observer and just for fun because we're not fun managers. There's a good, quick buying opportunity. Look at stocks like Marsh or Aeon that drop overnight. Look at the article that actually came out. It was a Spanish app that was on chat GPT that then took it back to the comparison website to fill in all the details. For fun, I would say that's a great buying opportunity to take advantage of market mania where there is no reason for Marsh to drop 10% or any other listed stock on the back of that article and people selling off on that. It should be an opportunity for buyers. Yeah, so to shake out that less for some reason, I don't know if that's stock. But AI and technology more should allow the same amount of people to do more. Should be good for margins, ultimately. I think so. It's one of those things. If you're looking for revolution, I don't think it's there. I think it will be incremental improvements because you know, probably apocryphal tales when the iPad first came out, you saw someone in Lloyd's photocopying a slip on an iPad. So I think there's absolute areas to improve market efficiencies like there is in every sector certainly in insurance. And I think that's where technology should be honest. Is there a down topping AI following your rounds? I hope not. I'm filling in the blanks for you. Analyzing cash flows, you know, can be tedious. I think probably we've already started to do it. So in terms of we've got all this collateral, we've got off the peg AI systems that we can put all our information into. So we've got it ready made building rock to have comparison to help with presentation, help with all the stuff that you generally do and needs assistance. I think it allows a lot of people to get more out of their job. What about the scale of your own ambition you're running the show? This business has grown in a very solid and quite conservative way. Do you have ambitions? You know, you could for example become a global business. I know you've had investments that are overseas at different times. Well, we're still very much international focus. I think we're probably global is a bit too grand for our aspirations, but I think we'll always be a London centric. We'd have to grow materially quickly to consider moving away from London. Because there's so much runway. Exactly. I think being careful as a listed company, so I don't get fall over giving out forward looking statements or anything like that. I think if you look at what we've typically achieved, it's always been 12% nav growth year on year for a 30 year period, which I think is pretty good to achieve. And now the portfolio's got bigger just on a slide rule basis for it, 350 now over the next three to five to seven years. You can see theoretically that half a billion, 250, a billion. And then there'll always be an innate discount on our nav per share to our market price per share. And it's our job to keep that discount as small as possible. Yep. And now being net asset value for anyone who doesn't know all their three letter abbreviations. Dan, I've come to the end of my questions. So anything that we should have spoken about that we haven't? No, I think you and I both tremendously optimistic about the insurance sector. And then the long term, does the softening market worry you? I mean, you've seen it before. Strange enough, I actually have. I remember it. I've seen a few of them. Yeah, when I started the hard market and softening it, it's a mythical thing that happened and in the 80s and 90s, this is how it changed the market. And now I haven't gone through it. It's probably not as seismic as I perhaps thought it was. But I mean, everybody's in the market has to accept that prices go up and go down. But from our standpoint, because we're on the early stage, new businesses, new business. So if you didn't have the account the year before and it was a hundred pounds premium, and now it's 80 pounds, still 80 new pounds. Still 80 new pounds. And I think that's the way you've got to look at it. On the underwriting agency side, we've hopefully backed underwriters. We've got the discipline to say we're in it for the long term. And I suppose if we were looking at investments on a three or five year scale, we'd probably give it more reference or it'd be more relevant. But we can go five, 10, 15, 20 years and it doesn't suddenly become a bad business because the market's off. If we backed it on the basis of the market, then that would be something else. Yeah. And let's say look at the business side. Next is nearly all of it happened in a soft. Yeah. You only got the benefit right at the end. Yeah, it's an odd one because in a soft market, you think it should be easier for M.J.s because their distribution, everybody's distribution focused on a hard market. Distributions constricted. So M.J.s should be the first to fall. None of our portfolios M.J.s fell during the hard market. They all actually grew. And I think that's testament to the skills of the team when they're underwriting discipline. Absolutely. Dan, thanks so much. I've really enjoyed talking. Thank you for. Well, I hope you enjoyed today's episode. 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Voice of Insurance is produced by me, Mark Gagan. Music was written by Anna Gagan and produced by Carlos Gagan. Check out more podcasts and written comment pieces at www.thevoiceofinsurance.com. [BLANK_AUDIO]