Martin Pike, chairman of SIAS, talks to Richard Purcell about the challenges of running a large consultancy, the golden era of insurance, and how actuaries can get ahead in the profession and on the board
Martin Pike began his career at R Watson and Sons, now part of Towers Watson, where he rose through the ranks to become managing director of the risk consulting and software practice across Europe, the Middle East and Africa. He took time out from his busy schedule to sit down with The Actuary to discuss the new ventures he has taken on since leaving the firm, including life as a non-executive director, and his work in social housing.
What attracted you into the actuarial profession?
When I left university, there were plenty of jobs for graduates, so getting a position was never going to be hard. But the actuarial profession stood out as being quite special. A mathematical basis combined with a strong professional and ethical focus appealed to me. It was also safer than the international rallying that occupied much of my spare time!
What was life like for you as a new graduate?
I really enjoyed the fact it was a relatively small consultancy, which meant you could get involved in a wide range of projects - life and pensions - and there was plenty of client contact. At the time the life insurance market was changing rapidly: new products, new systems, lots of new insurance companies being set up, and lots of regulatory change.
The introduction of embedded values and M&A activity meant that our business was growing fast, and there was plenty of scope for learning and development as I was thrown into new projects. We were pretty stretched but the team spirit was great and somehow we always delivered.
What advice would you give to student actuaries today?
Apart from the obvious - that is to work hard and get through the exams quickly - I would say it is important to get actively engaged in your industry. You shouldn't wait until you qualify to start your career - getting involved in things outside your normal day job, volunteering or otherwise, is important as it gives you different perspectives.
You have held a number of volunteer roles within the profession, including a stint on Council and your current role as the chairman of the Staple Inn Actuarial Society (SIAS). What would you say to those who don't think they have the time to volunteer?
I think it is a question of balancing your priorities. Meeting deadlines at work obviously comes first, but it is possible to find the time if you want to, provided you are well organised, and you communicate well with your boss! If you want to get on in any industry you need to do more than just the day job, as you need the broader perspective to get ahead of the pack.
During your time at Towers Watson, the firm grew quickly to become a leading consultancy in insurance. What do you think were the keys to success?
The most important factor was the emphasis we put on building strong client relationships, and putting clients first. We were able to win a large number of appointed actuary roles, and these gave us good and regular access to senior executives and the board. Our highly integrated approach meant we were very much part of our clients' businesses. For many years it was like working for a number of different employers. By having such a deep understanding of their businesses, we were better able to respond to their emerging needs. I think the demise of the appointed actuary role means it would he hard to replicate the same success today.
We were also very active in the demutualisation M&A activity that transformed the industry. To be successful over a long period of time, it was also about changing our business as the market changed, and staying ahead of the curve.
We had to constantly review what we were doing, and not be afraid to challenge ourselves to develop new thinking, new techniques and new software. In many ways, I think we reinvented our business every few years.
What skills do you think helped you rise to the role of managing director?
It was mainly about being comfortable with change, and having a clear strategic view on how we should move forward. Within a professional services firm there are many intelligent people, and gaining their support and buy in to strategic change was always critical. I spent many hours talking and listening.
What were the biggest challenges of running the business?
Growing the business outside the UK was the most challenging aspect, because in other markets the role of the actuary is less defined. We had to create a market for services and recruit the best talent from a relatively small pool. We learnt that every country was different and the calibre of local leadership was absolutely critical.
More recently, Solvency II has been a big challenge. Although it meant large project revenues from helping clients with implementation, the projects were all-consuming and sucked budgets from other strategic developments. It is clear to me that the focus on Solvency II over the last few years has held back the strategic and commercial development of the industry (such as responding to the digital revolution), and driven actuaries back into technical roles. A more gradual evolution of the new solvency regime would have been better for the industry and the profession.
What would you change about the profession today?
The world around us is changing rapidly and we need to ensure we remain in touch with the commercial and business environment on a daily basis, so that our advice is relevant and valuable to our clients or employers. We also need to make sure we don't over-regulate ourselves so that we become difficult or too expensive to employ. The profession needs to get the right balance between the need for adequate technical training, and the need to support actuaries to develop and broaden their commercial careers.
You recently became a non-executive director for Standard Life. How is this different to your previous roles?
It is very different, but leverages my knowledge of the industry, of regulation and of strategic risk management (and I can understand the actuarial results). The board has a broad agenda and this stretches me well beyond the financial and actuarial aspects. I am thoroughly enjoying the opportunity for further learning and development. It has been a very stimulating experience, being part of a strong FTSE 100 board, with new challenges for me personally.
Do you think actuaries make for good non-executive directors?
I don't see why actuaries shouldn't make good non-executive directors, but they need to bring more than actuarial skills. Being a good actuary is not enough. Boards don't necessarily need the skills of an actuary, so we have to demonstrate the broader strategic value we can add in these roles.
Can you tell us about the social housing project you have become involved with?
I am working with a small group of people trying to raise a substantial amount of capital to build social and affordable housing. There is a real gap in the UK between the very high demand for this type of housing and what institutional investors are prepared to invest, due to the complexity of such projects. The headlines are frequent, but the reality on the ground is that few projects are being funded.
If you think about it from the point of view of institutional investors, these are big construction projects - with construction risk - followed by a series of long-term inflationary rental cashflows which are potentially quite attractive. Unfortunately most institutional investors are averse to construction risk, and really only want vanilla bonds that fit nicely within their benchmarked portfolios. So to close this gap, we are trying to mitigate the construction risk and help institutional investors see the attractive investment opportunity. It is certainly challenging.
Your projects have a strong zero-carbon objective. Why should this be an important consideration for institutional investors looking at such projects?
This isn't about being green - although it would of course be good for the environment. We have developed a concept of long-term sustainable and low energy housing that will deliver very low energy bills for tenants. This will ensure high occupancy levels - and high rental income - as local authorities will prefer to house families in more energy efficient (hence lower cost) housing. In addition, the high sustainability is an essential feature if we want the rental estate to remain a strong investment proposition for many years. As well as being an ethical investment - and ticking a big box on social and corporate responsibility goals - it is also just good business.
Do actuaries have a role to play in such projects?
Actuaries obviously have the analytical and modelling skills required on a project like this, can help in creating strong risk mitigation strategies and can help to construct assets that would appeal to institutional investors. But these skills are not unique to actuaries, and actuaries tend to ask for more money. I would love to see some more actuaries getting involved in these areas.