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Dec / Jan 2012
asdasd Steely Resolve

Writer: John Andrews / Photographer: Ghadi Smat

Founder and Chairman of the region's largest insurer, Lutfi Fadel el-Zein is a man who deserves praise, even if he doesn't like it.


Lutfi El-Zein apparently doesn’t want to be interviewed. He’s in one room of Medgulf’s executive suite offices, then slips away to another, leaving us by the windows overlooking Solidere and the sea beyond, while his companion talks us around his sudden absence. Once fixed to a chair, Zein calls out “come, sit down, join me” to hallway passersby. “I’m being interviewed,” he continues, with the palpable unspoken subtext of ‘I’d rather not face this experience alone’.

He evidently wants the seats of his office filled. Though not looking to hold court, Zein seems to be trying to crowd out the attention on himself through conversation with everyone else and he’ll alternatively praise and berate his way there. The only time he asks to be queried occurs when he’s set square before the photographer and is expected to pose.

At least as of late, attention is invariably on the Medgulf chairman. The International Financial Corporation - a member of the World Bank Group - picked up a 14 per cent stake in the company for 124 million USD last February. The equity investment is the IFC’s self-styled ‘stamp of approval’ for Medgulf’s transparency and corporate governance and a clear signal that it believes Medgulf is best situated to increase its insurance penetration of the Middle East.

The buy-in came on the tail of a remarkable course Zein charted between the historically competing interests of two political and economic titans: Saudi Prince, HRH Alwaleed bin Talal bin Abdulaziz Al Saud and the late Lebanese Prime Minister, Rafic Hariri. Both were simultaneously partners in Medgulf - as Aziziah and Saudi Oger respectively - and both, Zein states, “were always at odds.”

It was the prince who first broached the idea that he register an insurance shop in Bahrain. “Get yourself a company,” Zein recalls him saying in the early 1990s. “There’s something in the pipeline.” That something turned out to be new insurance regulation in Saudi Arabia. Nearly overnight, there was tremendous government-driven market demand. 

Medgulf was created in 1995 to soak up some of that demand up. Two years later, Prince Alwaleed became a partner and in the ensuing years, business expanded rapidly. “We were booming,” Zein remarks. “We had all the assets. We were workaholics and we were pushy. And so we made it.” 

The success he enjoyed in his relationship with the prince was mirrored in Hariri. Prior to launching Medgulf, he had purchased the small, London-based brokerage firm Addison Bradley. “It had a very nice British name,” he exclaims in an aside. After a hard fought contest, the firm became Solidere’s risk consultants in 1992. “They wanted a big name,” he says. And at the time, that name was Sedgwick. So Zein cold-called the firm, bartered an association for the hefty fee of 160,000 USD and set the deal on a platter before Solidere at 30,000 USD. “It was a breakthrough. At that cracking price, nobody could refuse Sedgwick Addison Bradley,” he says. “Even after paying Sedgwick back, I made a lot of money.”

He then tells me that just ten days after the prince suggested partnering with Medgulf, word was leaked to Hariri by a lawyer working on the agreement. “Sheikh Hariri said ‘we are more entitled to be partners with you than anyone else’. I was his sole insurer. So I said ‘fine, but if that’s the case, let’s make it a tripartite agreement’.” Paradoxically, the three-way partnership worked. “It was challenging, but it gave me peace of mind. Nobody could take the reins.”

The financial crisis of 2008 sundered this delicate balance. “Prince Alwaleed had had a bad year and wanted out,” Zein explains, “so unwillingly, he left the company.” Suddenly he found himself immersed in a power struggle with his remaining partners. Although Hariri had been assassinated in 2005, his stake remained in the family.

“The platform was destabilised,” he continues. “I fell at odds with the representatives of Sheikh Hariri. They thought the company was theirs. I thought they’d take the company nowhere. They made a big fuss. We couldn’t decide if we were part of an investment tycoon or an institution that does its job alone.”

Long evenings, and long nights is how Zein describes the year and half of negotiations that followed. “You need nerves of steel to go through something like that. I went to Saad Hariri once, twice, thrice. I told him to sell or buy us out.” In the end, it was Saad who sold. In April 2011, sixteen banks jointly announced a syndicated loan of 400 million USD – the largest ever in Lebanon – with which Zein finally wrangled complete ownership of Medgulf from his partners and cleared the way for the IFC’s purchase in 2012.

Zein’s success this year has been driven much in the same way in which he tried dodging this interview: packing the room. Whether in the past that meant tethering Prince Alwaleed and Hariri together or today, ensuring an active role on the part of IFC. “Every time there’s an important issue, we pick up the phone and call them, we want them to be involved,” he says. If Zein has pursued a policy of inclusion - occasionally forced - he says it’s the relationship of mutual trust with insurance regulators and credit auditors that has allowed Medgulf to achieve the level of transparency that earned them the admiration of the IFC. It’s a policy he intends to take to the next logical step and discloses that given the right market conditions, Medgulf Insurance Group is set for an IPO in 2015 or 2016.

Dr. Marwan Iskandar, a Medgulf advisor, used the description ‘a hand of steel in a velvet glove’ to describe Zein’s leadership over the past few years. Not to put too much credence in an over-wrought turn of phrase, this ‘steel hand’ became most apparent in the subject of market competition. “It’s a very touchy issue,” he says. “In Saudi Arabia, our main competitor wants to maintain itself as the largest insurer in the Arab world. Now they’re a government institution. We don’t mind letting them be number one in Saudi but in respect to the Arab world?” Zein’s answer is unequivocal. “No.” 

The arch maneuverer expects to achieve his goals on his own terms. “We’re not crooks, we’re not playing games. We have a beautiful operation with a sound book of business.” 

Competing against companies he says are expanding at 15 to 16 per cent per year but by slashing their prices, Zein is aiming instead for five to six per cent growth without cuts. “We’ll live with this situation until this wave moves away. Let’s see how those others will end up. I have time,” he notes succinctly. “I don’t like losing money when I take on business.

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