Older Article but worth reading
Loving the beaches and lifestyle in Bankwest’s sunny home town of Perth, the father of two children aged under five was however lured back to Sydney last year to fulfil a desire to become a chief executive.
The decision has proved fortuitous for the former retail banking boss of Commonwealth Bank-owned Bankwest, potentially soon becoming a CEO of a listed company should insurance giant Hollard pull the trigger on the float of its Greenstone operations.
“We are looking at the opportunity (to float), but it’s very early stages,” says Reid, the chief of Greenstone since August.
“It’s exciting. If we do it, it gives us a massive opportunity for growth.”
While no dates or details have been set in stone, Hollard late last month appointed Goldman Sachs and Macquarie to lead the potential initial public offering of Greenstone on the stockmarket, suggesting that momentum is building.
Greenstone, separate to Hollard’s general insurance arm, is a direct distributor of products such as life insurance, pet insurance, funeral and income protection. It also owns comparison website Choosi and has made a little known entrance into the $1.3 trillion mortgage market through the recently launched Real Home Loans, selling mortgages funded by Macquarie over the phone.
While Reid is excited about the push into mortgages, the former banker says Greenstone will always stay focused on its core offering of distributing insurance products.
“We internally don’t think of ourselves as an insurance business. We are a direct distributor of products and I think it’s important we stay core to that,” he says.
“We’re trying to pitch ourselves not as an insurance business.”
For the year to June 30, Greenstone made a profit of $45 million, according to accounts filed with the financial regulator. While there are few listed companies Greenstone can be compared to, the profit suggests it could be one of the year’s notable financial services floats given earnings may have grown this year.
Reid is coy on details as the company mulls options, but signals that any float would probably be pitched as an organic growth stock rather than being driven by acquisitions.
“Our plans over the next three years are to significantly grow. In terms of any inorganic stuff, we’ve got no plans. It’s more organic growth, what we’re doing ourselves,” he says.
The most recent is Real Home Loans, the new product softly launched in October that has settled around $10m in mortgages. Reid says that while small, the model needs to be proven and developed before “we go gangbusters”. Also, there was the Christmas break and lag time between approval and settlement.
But while it may one day be expanded beyond the phone to include a face-to-face element, there are no plans “to take over the world” in the highly competitive market and overtake mortgage brokers and banks.
“It’s a start. I’m just encouraged people are picking up the phone and even inquiring and that is picking up every day, which says to me there’s a proposition there,” he says.
“But this is not for 90 per cent of the population, this is for the very niche market in my eyes who know what they want, want it quick and easy.”
“If this is even 5 per cent of our overall profit, I think that’s a success. It’s a niche market and we’ve got our customer base, so there’s an opportunity to cross sell to, (but) we’re not in anyway shape or form thinking this is going to be the golden egg.”
Rather, most of Reid’s time remains on Greenstone’s largest business of life insurance, which is underwritten by Hannover Re. It comes amid some of the toughest conditions the life industry has faced as customers drop their cover and make more claims, which Reid will this month try to counter through the launch of a new advertising campaign.
“It has been a very hard industry and it all comes down to disposable income for me,” he says. “With pressure on disposable income, we’ve got a duty to make sure people understand how important insurance is.”
Another growth area is funeral with its guarantee that premiums will fall rather than rise and customers ultimately receive the same payments they put in, which Reid claims is a “fundamental first in Australia”.
“Premiums were going up as people got older. Now we’re going the other way, they’ll never go up, will go down every five years and be rest assured every single dollar you put in you’ll get back when you die.”
“It works for us, clearly, but it also works for the customer and the response we’ve had to that has been brilliant and way above our expectations.”
