Can't get enough of the Blues

profile : Matthew Harding; Paul Rodgers talks to an insurance tycoon about his passion

THERE are two passions in Matthew Harding's life - insurance and football. The first made him a millionaire, the second cost him a fortune. Last week, while he was in America taking care of one, the other exploded behind him. Chelsea Football Club's chairman, Ken Bates, accused him of orchestrating a power grab for the club, leading to cartoons of the duo as Wild West gunslingers or squaring off in a boxing ring.

Harding - who last week resigned from the board of Chelsea Village, the holding company that owns the Blues, while retaining his directorship of the club itself - took the furore calmly. "I'm surprised so much mayhem's gone on in my absence," he said from Boston. "I'm not looking for the hostility and war of words I'm led to believe Ken Bates is after." As for charges of an imminent takeover bid for Chelsea, he said: "One of my life's ambitions is not to be chairman of Chelsea. It all depends on what's in the best interests of the club."

The tale being told on this side of the Atlantic was far less diplomatic. In a series of public bombasts, Bates claimed that Harding was mounting a coup and insisted it would fail. "He has not come up with a single constructive proposal for the long-term future of the club," complained Bates, adding that Harding is "totally unfit to be chairman of this football club".

If there were a coup at Stamford Bridge, Harding, 41, would be the obvious leader. He has the overwhelming support of the fans, who told one tabloid in a straw poll they thought he should replace Bates - and soon. Harding has already ridden to the team's rescue several times in the last two years, buying the freehold on the grounds for pounds 16.5m and pumping in pounds 10m in interest-free loans to finish the new North Stand and pay for player transfers. Calling in those loans would push the Blues to the brink, or beyond, though Harding said he would never do anything to hurt his beloved team. But with an estimated purchase price of pounds 100m, Chelsea remains within his reach.

How he came to have such reach is another story. The enthusiasm in his voice when he talks about Chelsea gives Harding the air of a dilettante obsessed with sport and possessing more money than brains. Nothing could be further from the truth. His rise to power in the City has been almost as meteoric as his rise to prominence in football.

In less than a decade he has taken a sleepy but profitable little maritime reinsurance brokerage at Lloyd's and turned it into one of the most profitable companies in the country. With a staff of just 65, he reported pre-tax profits last year of pounds 32.3m. From modest levels a decade ago, his personal worth has climbed to about pounds 135m, according to the Business Age Rich 500, which ranks him between the Marquess of Northampton and Sir Tim Sainsbury as the 131st most wealthy man in Britain - down, admittedly, from 78th a year earlier. Last year, he earned pounds 3.25m.

Harding's love for football mixes uncomfortably with the staid world of Lloyd's. He reads Chelsea Player by Player in the office. He wears a Chelsea strip to games, changing into a suit before entering the directors' box. He never willingly misses a home game. A few years ago, he was chased by opposing fans while playing away. Not the sort of thing that happens to your average company boss.

The twin threads of Matthew Harding's life stretch back to his father, a cargo underwriter for Sturge, a then small Lloyd's syndicate, who took him to his first Chelsea home game when he was eight. In his teens, boarding at Abingdon in Oxfordshire, he got 10 O-levels and an A-level in Latin, but Chelsea ruled. It was only after he left in 1971 that the lure of the Square Mile began to pull.

His first efforts were at two merchant banks, although he stayed less than a year at each. Then one day in 1973, he met his father for a pint at the Lamb in Leadenhall Market. There he was introduced to Ted Benfield, who was just starting up a new reinsurance brokerage, Benfield, Lovick & Rees. Harding was hired as the firm's 10th, and most junior, employee. "I was the one who did the post and got the coffee."

Most of the 1970s he spent learning the business and becoming one of the main contributors to the company's bot- tom line. Then in 1982 he march- ed into the directors' office and asked whether they wanted him to work for them or with them. They offered him 10 per cent of the company and a seat on the board. When they started to retire five years later, he organised a management buyout, promising his mentors a share of at least pounds 4m in profits for a decade. Since then he has made them far richer.

His new holding company, Benfield Group, quickly shed its non-core activities. The remaining reinsurance brokerage expanded organically into aviation and general catastrophe business. A sound strategy, but not enough to explain pre-tax profits that jumped from pounds 20m in 1991 to pounds 32.3m this year, while shareholders' funds grew from pounds 8.2m to pounds 59.5m. "We move more money more efficiently than most other companies," he claims, with the same pride you hear when he speaks of Chelsea.

The key to Benfield's success is summed up in a phrase from the company's business philosophy - "innovation and a refusal to accept every market standard or practice as sacrosanct". In a world where buyers and sellers are out to shaft each other, Harding broke with the past by developing lasting trust. His clients keep at least 10 per cent of the risk they want to pass on, giving the reinsurers confidence that it is not a ticking time bomb. In return, the primary insurers know that the remaining 90 per cent will be placed.

The second main innovation was to insist on realistic fees and prompt payment. Too many insurance companies make their profits on the interest accrued when they delay payments, either of premiums to reinsurers or of claims to the primary insurers. Some reports say that Benfield can get people to pay in 24 hours, although Harding refused to set a time limit.

Surprisingly, Harding has had few imitators. And with one of the highest- paid workforces in the City, not many of his employees are eager to set up on their own. The lack of copycats may soon end. In March, he established Benfield Re, a joint venture with Rea Brothers Group, the merchant bank, to offer specialist advice to the insurance industry.

His latest venture, launched on Thursday, is the Benfield and Rea Investment Trust, a quoted vehicle, advised by Benfield Re, that will invest primarily in corporate Names. An even more dramatic departure from the firm's past strategy is its first acquisition. A possible takeover of Ellinger Heath Western, another small brokerage, is currently in the works. Talks are expected to lead to an agreed price of around pounds 20m within the next month.

Harding is cagey about wheth- er his next target will be Chelsea Village, the holding company that owns the Blues. He says he has no plans now, but will not rule out the possibility. Despite sitting on its board until his resignation last week, he owns no shares in the club. He refused to convert his loan stock into equity because of the company's mysterious share structure. While Bates owns 30 per cent, he speaks for most of the rest through offshore nominee companies. "I'd have had a minority stake in a private company whose shareholders I didn't know," said Harding. A scrap at Stamford Bridge would be far different from what he's used to on Lime Street, however. Despite the support of the fans, he could have a tough time persuading Bates and his backers to sell up. The opposition has already been more vitriolic and personal than anything seen in ordinary takeover battles. And while Harding is a dab hand in the insurance market and a knowledgeable Chelsea fan, the business of football is a game in which he is still a rookie.

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