Scrutineer: Clive Cowdery - A man with resolution

Published on Tuesday 9 September 2008 21:13

THERE are contra-thinkers and there is Clive Cowdery. The self-styled "value catalyst" in the insurance sector is spreading his wings dramatically again, much sooner than observers thought he would after selling the old-look Resolution to Hugh Osmond's Pearl for £5 billion last year.

Cowdery, a proven insurance industry tycoon, is to raise 1bn from a stock market flotation of his new Resolution group. And he aims to consolidate with it. With a vengeance, it seems.

The initial billion quid is just the platform for the pyrotechnics.

Cowdery's new heavyweight team was making it clear yesterday that those institutions that backed the float would do so on the clear under-standing that further funds would be sought of up to 5bn in the near to medium term to finance the consolidation.

Those institutional backers – in the past they have included the likes of Standard Life Investments, Prudential's M&G and HBOS's Insight fund management arm – would get pre-emption rights for future cash-raisings.

Cowdery has earned them all enough in the past to assume institutions will be along for more than the flotation ride.

It is brilliantly simple: the owners of financial services companies are being asked to put up the money to restructure those companies to make them perform better by a man with a proven record in restructuring. Everybody, hopefully, wins.

New Resolution is also widening its scope. The old group, which Pearl pipped Edinburgh life assurer Standard Life to buy, made its name by buying up funds that were no longer open to business, and then consolidating them to make them cheaper to run.

The new group says it is targeting four main financial services areas with its warchest: life assurance; general insurance and re-insurance; banks; and asset management.

A sceptic would say Cowdery's move in this climate is very "brave", television's Yes, Minister-speak for "you must be barmy".

But the entrepreneur-cum-financial strategist has not got where he is by making too many wrong calls.

His iron-nerved judgment this time is that he is not taking a risk by acting so daringly in difficult markets; he believes he will be exploiting that risk to make money.

A bit like surfing a big wave but with the hope of a golden beach in prospect.

NOT quite a red letter day for Redrow, but any good news for the washed-out housebuilding sector is seized on by the market like water in the Sahara.

So it was that the company's nailing down of a new 450 million debt facility to 2011 gave a fillip to the shares.

In truth, it was not just Redrow's better news on lending facilities as we go through this downturn, which is especially hard on the housebuilding sector, particularly as it came with the sting that the effective interest rate on the new debt will rise a couple of percentage points to about 8.5 per cent from 2008-9.

The market also liked the hard-headed realism on show. Redrow bit the bullet and wrote down the value of its landbank and work in progress by 259m.

That saw the group tumbling to a 194m loss for the 12 months to the end of June compared with a 121m pre-tax profit in the previous year, but Redrow is hardly alone in swimming in red ink in the housebuilding industry these days.

The City also appreciated the group's decision to conserve cash by cutting back its activity in the land market amid falling land values.

The company has 16,450 current land bank plots compared with 20,200 a year ago.

A key indicator of the new austerity is that the market was also philosophical about Redrow's decision to blow out the final dividend to conserve cash.

All were necessary decisions in these unprecedented market conditions for the sector.

Even excluding exceptionals, Redrow's underlying profits nearly halved. Chief executive Neil Fitzsimmons said it was virtually impossible to tell when any upturn would come.

Like his peers, the Redrow boss feels the government is skirting the issue with initiatives like the stamp duty holiday on house purchases up to 175,000.

Just as the pith of the banking crisis has been the state of the US housing market (hence this week's developments with Fannie Mae and Freddie Mac), Fitzsimmons adds his voice to those who say the UK market's essential problem remains mortgage liquidity.