Chris Blackhurst goes the distance with the Pru's new chief executive.
1938: Born London
Education: Tottenham County Grammar School. "I think I was very
charming. I was a pretty medium sort of guy. I wasn't
a boffin or a Just William type."
External BSc degree from London University
1955: Joined Prudential's economic intelligence unit
1976-78: Senior assistant investment manager
1979-80: Deputy investment manager
1981-89: Deputy investment manager and chief executive of
Prudential Portfolio Managers
1990: Chief executive. The Pru will become "a more
international organisation than it is now, serving
more customers and providing a better service."
Tottenham Court Road, Monday. Heavyweight champion Mick "the Bruiser" Newmarch maintained his undefeated record with a stunning 40-minute display here today. Sitting in his 10th-floor office, the 53-year-old veteran adopted his normal, belligerent, machine-gun like tactic of rarely allowing his opponent - on this occasion from Management Today - to get a word in edgeways.
On potentially his most vulnerable points, the six-foot, well built Prudential boss, nicknamed "Bruiser" by Private Eye magazine, was especially brutal. His challenger enquired: "What do you say to people who say the Pru should have stuck with estate agents and not sold them, particularly at the bottom of the market?"
Newmarch snapped: "It's too trivial to dignify, just too silly for words to say we sold at the bottom. If they believed we reached the decision whimsically they are quite wrong." Later, his opponent tried again: "What about City analysts who say the Pru has lost its way and should pull out of general insurance?"
The Bruiser responded: "I'm aware of their opinions. Their observations are very easy to make - they are entitled to have their point of view as to what we should be doing. But I don't accept their advice."
Undaunted, his challenger asked: "What gives the Pru the right to tell people how to run their businesses?"
The champ hit back: "We never tell people how to run their businesses. Listen, we behave as responsible shareholders should do. They can't have it both ways."
Finally his opponent landed his best punch: "How can you justify a 43% salary increase (to £543,673 last year) when the Pru's profits fell by 36% to £141 million?"
Showing total contempt, Newmarch smacked him down: "I have a salary which is determined by a non-executive committee of directors. If you'd asked me is there an association between price and quality, I would have said yes, there is."
It was the sort of performance that the public is growing to expect from Prudential's new chief executive. Prior to his appointment in April last year he was known only to a handful of City insiders and the occasional industry chief - though in 1988 he did make headlines when it was revealed that the normally conservative Pru had spent £547,500 on installing Newmarch, then a director, in a flat in one of the most expensive parts of central London.
Since taking charge Newmarch has gained much wider recognition, not only as the man who runs Britain's biggest life assurance company and controls the largest investment portfolio in the country - £36 billion - but because he has also: closed 175 estate agencies, with the loss of 500 jobs; closed 17 departments in a reorganisation of the Pru's general insurance business, with the loss of a further 550 jobs; negotiated an unprecedented three-year "rolling" contract entitling him (on his present salary) to £1.6 million in the event of any abrupt departure; been attacked by shareholders at their annual general meeting for his refusal to set an example on wage restraint; moved from his flat in Nash Terrace, Regents Park, to a much grander property, in his words, in "one of the more convivial squares in Chelsea"; reportedly tried to hire Sir Bernard Ingham, Mrs Thatcher's former press spokesman, as PR adviser; and caused the Pru's 13,000-strong field force to vote for industrial action for the first time in 20 years - over a plan to separate them into advisers selling a wide variety of financial services and a lower grade collecting premiums.
In public relation terms, Mick Newmarch is fast acquiring a reputation as the not so prudent man from the Pru.
Talk to anybody who knows Newmarch well and they all say the same thing: to understand him it is necessary to go back to his childhood.
Michael George Newmarch was born in May 1938. George, his father, was a musician in the London tea salons. When Mick was two and a half, tragedy struck: his mother suffered a brain haemorrhage and died. By now, George was away doing war service in the RAF so Mick, an only child, went to live with Auntie Doris, his father's sister, in a small terraced house, in Tottenham, north London.
It was not until Mick was four or five that he first remembers seeing his father. He left a vivid impression. "He had caught malaria while in Sierra Leone and was bright yellow. What is more, he brought us bananas - also bright yellow - which I had never seen before."
When Newmarch was nine, his father was demobilised and returned to England. But instead of settling down with his son, he remarried and started another family. Mick remained with Doris.
Life was tough but, Newmarch maintains, extremely enjoyable. Even so, he was acutely aware that it could have been better: "There were a few nobs around who had bicycles - proper bicycles that had been bought, rather than ones you made yourself."
He went to school with his cousins, played football and joined the Scouts. He had, he repeatedly stresses, "a marvellous working class childhood and an excellent education in a co-ed grammar school".
But however hard he protests, there was always something missing. While he treated his aunt and uncle as parents and they looked after him as one of their own, he was also, he admits, a "virtual orphan". Though he will never say so, there must have been periods when he felt lonely and an outsider - which could only have increased with his father's death when he was 14 or 15.
It is this lack of belonging, people who know him well say, which was responsible for shaping the Mick Newmarch of today - for creating an ambitious, domineering character who craves attention from his peers but is not bothered by being alone. "Being an orphan motivates him," says a colleague. "Most people would hide it quite well but Mick wears it on his sleeve - he is determined to prove himself."
A former Prudential senior executive agrees: "Everything he has ever done goes back to his origins and a constant search for acceptance and identity."
Newmarch's early life was a struggle. After obtaining two A levels from Tottenham County Grammar School - "I think I was very charming. I was a pretty medium sort of guy. I wasn't a boffin or a Just William type" - there was no money for him to go to university, so he looked for a job.
One Friday afternoon he walked into the local employment centre and said: "I want to be in finance." The following Monday, aged 17, he started work as a lowly statistical clerk in the economics intelligence unit of The Prudential Assurance Assurance Company.
In those days the economics and investment departments were split. Newmarch, a bottom-of-the-heap clerk, would churn out figures on individual sectors but more pressing questions, like which companies were best, were left to the investment department.
Newmarch was lucky. Harold Rose, his boss and Prudential's first professional economist, took Newmarch under his wing. Eventually, at Rose's urging, Newmarch studied for an economics degree at the London School of Economics in the evenings after work.
By now married to Audrey, his childhood sweetheart, and with young children at home, Newmarch worked hard to obtain his degree. It was a fine achievement. But colleagues at work were not so impressed. "When I got it and proudly told the Prudential's staff department they told me I wasn't fully qualified until I took the actuaries' exams. I told them I had a wife and young children and I had had enough of working for exams in the evening."
But his degree did have some use. He was allowed to leave number crunching and become a fully fledged analyst. Newmarch dug in. Slowly but surely he hauled himself up the ladder. He had no difficulty in dealing with more senior people. It was no secret to colleagues where his ambition lay. "From the day he arrived, Mick Newmarch told everyone who would listen he was going to be chief executive," said a former director. "The fact that he got there was a tribute to the force of his own personality and perseverance, rather than having the company with him."
The guiding light in Newmarch's rise was Ron Artus. A Pru man to the core, Artus was the inscrutable long-time boss of the group's investment department. It was Artus who decided that the Pru would become the first institution to seriously try and bring about change in the management of companies in which it invested. His reasoning was simple: if the Pru's rivals were unhappy with a company's performance they merely sold their shares; but the size of the Pru's stake would result in stock market chaos if it bailed out, so Artus exerted behind-the-scenes pressure for change.
Companies complained of institutional interference but the Pru stood its ground. It is a policy that Newmarch still follows religiously today. At any one time the Pru has 20 to 30 "live cases" underway where his officials are working with, or against, the incumbent management to try and improve a company's performance.
Industry, Newmarch says, has nothing to fear: "In my experience, the relationship we have is one of great mutual benefit. We believe companies are best managed for the benefit of their shareholders, by people who understand what the shareholders' ambitions are."
Some dos and don'ts about companies doing business with Newmarch and the Pru are: don't have one person combining the role of chairman and chief executive; do appoint independent non-executive directors to form remuneration and audit committees; and don't expect any sympathy, either.
"Managements bleat about being raped by the institutions," argues Newmarch, "but my response is: why did they go public in the first place? They did it to liquefy their positions, which they did with great glee, and to raise future capital. Where from? From the institutions."
Under Artus, Newmarch worked his way steadily through the investment department until by 1982 he was effectively number two. It was then that he received his first break. The Pru's investment record was second to none, yet it only managed the group's money. Newmarch could not see why, based on that record, the investment department could not oversee outside funds as well - in return for a fee, of course. Artus agreed that the proposal be put to the board. Prudential Portfolio Managers (PPM), with Newmarch in charge, was born.
PPM has been a spectacular success. In nine years, funds under its management have doubled to £26.7 billion (worldwide the total that the Pru controls is £36 billion) and its clients include some of the biggest names in the pension fund world like Unilever and British Rail.
But PPM became something more than an adjunct to the investment department. Outside the company, in the City, PPM enjoyed a much higher profile than the boring, almost Dickensian Pru, while inside, PPM became a firm within a firm. At Newmarch's insistence, its members were taken off the Pru's pay structure and given their own, performance-related scheme. They had their own office and rarely mixed with other parts of the group.
In 1987, when Artus retired, Newmarch was lord of all he surveyed. As the Pru's investment chief, he was one of the most powerful men in the City. On a takeover bid, Newmarch, as ultimate holder of the Pru's inevitable share stack, was one of the first ports of call. Bankers and corporate leaders wanted to see him privately, away from the office. Suddenly his house in suburban Harrow was not good enough: he was a very important person so he needed a prestigious address to match.
It was a measure of Newmarch's growing power that he was able to persuade the company to buy him a £772,500 flat in central London. Newmarch contributed £225,000 to the purchase price; the Pru coughed up the rest.
Newmarch and his PPM dealers and the man from the Pru going round council estates collecting premiums were miles apart. The difference was brought home when the company decided to update "Prudence", its long-time gothic lady symbol. Corporate image-maker Wolff Olins came up with the new-look, trendier design which was readily accepted by everyone - except Newmarch.
The PPM chief wanted his subsidiary to have its own separate marketing and identity. "What he and his team constantly needed to be reminded of was that the vast majority of their funds came from the salesforce, the people about whom they used to be so contemptuous," recalls a colleague. He adds: "Mick was forced by Brian Corby (the then chief executive) to adopt the new image. Now, ironically, having seen how good it's been, Mick is a stronger supporter of it than Brian ever was."
When Corby let it be known internally that he was stepping down, there were two candidates for the job. As head of the company's international division, Brian Medhurst had overseen the recent acquisition of Jackson National in the United States. Within two years Jackson was generating as much premium income as the Pru had only managed to achieve after more than a century. Quiet, mild mannered and a qualified actuary, he fitted the classic Corby, man-from-the-Pru mould exactly.
Then there was Newmarch. The choice was between the old and the new; insurance insider and investment outsider. There was, says a former senior executive, "a tremendous feeling of shock" when Newmarch's appointment was announced.
Corby had given the Pru a tremendous kick. The company took on board some of the changes affecting the financial services industry. In 1983, 90% of company profits came from life insurance. Five years later, thanks in part to PPM, the proportion was down to below 60%.
Corby took the Pru into areas of potential money-making: unit trusts, personal pensions, investment management, estate agencies. But above all he gave the company a new identity and a more streamlined, decentralised structure. Talented outsiders were brought in and, for the first time, subsidiaries were encouraged to compete with each other.
Corby, though, did not go far enough. So far 1992 and the globalisation of financial services have virtually passed the Pru by. The core of its operation still remains the door-to-door sales operation. Other life companies such as Standard Life and Norwich Union have linked up with building societies, but not the Pru. Other companies have deposit-taking arms but when the Pru's policies are redeemed, the proceeds disappear from the company for ever. Similarly, rivals like Allied Dunbar have made great strides with direct selling and mailshots but the Pru still likes to send round its man in his bicycle clips.
Despite Corby's best efforts, Newmarch has inherited a top-heavy organisation. In 1980 overheads accounted for 31% of the Pru's premium income. Today the figure is almost 40%. In theory, Newmarch should be the right man for the job. He is not immersed in the insurance side of the business. "He has the right attitude - that the Pru is not an insurance company but a financial services corporation," says Alan Curtis, insurance analyst at Barclays de Zoete Wedd.
Despite his poor image, Newmarch does contrive to give out the right signals. Costs will be cut and other forms of distribution explored. The Pru will become "a more international organisation than it is now, serving more customers and providing a better service". But to date the only tangible evidence of any progress has been the selling off of estate agents (despite the fact that they took the Pru onto the high street and into upmarket residential areas where its salesmen rarely venture), the hiring of senior personnel on (by the Pru's standards) high salaries, and the splitting up of the home service (with all the consequential industrial unrest).
When questioned about his salary, Newmarch's favourite reply is that you do not expect to buy fine champagne at Asti Spumante prices. It would be a brave man indeed who pointed out that when you buy champagne you do not expect to receive Asti Spumante. As to which he is, only time will tell.
(Chris Blackhurst is City editor of the Sunday Express.)