26 August 2015

Scott Egan, Interim Group CEO said “In the first half of 2015 we delivered income of £184m and operating earnings of £39m, down on the prior year by 10% and 40% respectively. Despite this the business still delivered an operating earnings margin of 21%. The context for our performance is well known, but what is important is that in Q2 we began to see the first signs of improvement as the rate of year on year decline in our organic income improved. In addition we signed another long term capacity deal with LV, following the agreement we announced with Allianz in May. We also signed a number of strategic insurer deals which were delayed from 2014 due to our financial restructuring.

Our expense ratio remains high at 79% but this should reduce as the organic income improvement gathers momentum and the business starts to grow back into its cost base. We will manage our expenses appropriately, but we do not want to take short term actions that could impact on the recovery of our income.

The performance of the business is not where we aspire it to be, but there are encouraging signs only three months after the completion of our financial restructuring.

Finally the most important aspect of our business is our people. We’ve retained talent while also beginning to attract talent again to the business. The imminent arrival of the remaining members of the executive team will help drive confidence and momentum moving into the second half of 2015 and into 2016. I wish them every success as I pass the baton across to them and I believe the business can look forward with stability and growing optimism."

Towergate Insurance announces 2015 Half Year Results | Towergate Partnership

John Tiner, Towergate Chairman commenting said: “The Group has renewed confidence in its strategy to lead in the specialist insurance and underwriting markets. The recapitalisation of the business has reinforced Towergate’s position as a formidable presence in UK insurance, re-emerging more determined than ever in its ambition to be a leading UK insurance broker. There has been an influx of talent in every part of the business and I am delighted to be part of the Towergate story as it moves into a new chapter. I am encouraged by the more recent small improvements in some of our key performance measures and look forward to working with the leadership team in tackling the challenges and opportunities which lie ahead.”

Group Financial Highlights*

 

Business Performance Highlights

  • Half year performance continues to be affected by the Group financial restructuring which completed in April
  • 10% decline in income year on year but with an improving trend in Q2 for organic income (1.6pts better than Q1)
  • Current expense ratio at 79% is expected to stabilise at a lower level in the longer term as organic income recovers and operational efficiencies are identified
  • Reduction in Profit Before Tax primarily relates to Group financial restructuring costs and reduced operating earnings
  • Decline in operating cash flow driven largely by the reduction in operating earnings
  • Long term strategic deals with LV and Allianz signed in May and June respectively
  • Several insurer deals delayed from 2014 are now completed
  • The financial restructuring of the Group is now complete with the final few top companies being placed into liquidation

Divisional Performance*

 

Divisional CEO comments on Half Year Results

Mike Lawton, CEO of Insurance Brokers: “In Q2 we have seen retention rates improve significantly and new business performance continues to be encouraging. Insurer deals are very much back on track and we have completed the selection of our insurer partners to support our SBU client offering. We have been focused on providing opportunities for development, putting in place appropriate reward mechanisms for staff which is fitting for the loyalty, resilience and the support they have shown the company over the past 12 months. We are in the process of recruiting new income earners, with over 15 new joiners already YTD. We have completed all planned transfers of clients from our local offices into our dedicated Manchester small business centre and retention continues to improve as the business matures.”

Clive Nathan, CEO of Underwriting: “Q2 performance continued to be affected by a tough trading environment. Enquiry levels are up by 30% and quotes up 35% YOY and this has not yet converted to income but it is a welcome sign of confidence returning. In claims we have increased our Net Promoter Score from -13 to +33. We have invested in our regional model and Arista has been brought together with Fusion under one management team, enabling access to additional products and distribution. Whilst new business is proving tough to secure at acceptable terms, retention is holding up well and I am delighted to have signed a new five year £110m Household partnership with LV.”

James Tugendhat, CEO of Direct: “Through Q2 we built on the positive underlying trends seen in Q1 with double digit new business growth and further strengthening of retention in key product areas. Performance is driven by our ongoing investment in enhanced capabilities in digital, marketing and product development. We are driving improved operational effectiveness through stronger team engagement and site investment leading directly to improved quality assurance and customer rating scores. Challenging market environments in niches that represent c5% of our income including military and education, continue to place a drag on our overall growth momentum.”

Steve Wood, CEO of Paymentshield: “There was a strong underlying performance in the quarter with three consecutive months of growth in household policy numbers and new business submissions up by 60%. Income year on year is impacted by the continuing decline in the MPPI book and a one-off non cash income recognition adjustment in 2014. Our focus for the balance of the year is to continue to build our distribution pipeline, whilst optimising sales volumes at our targeted margins and conversion rates.”

Andy Fairchild, CEO of Network: “Our Q2 performance is better than expected with income reflecting some strong growth for a number of our members, especially with key partner insurers. Our expense growth reflects our long-term commitment to our members to invest in our market leading member services. In Q2 we have broken new ground with the launch of Broker Network branded E-Trade products, exclusive for our members and benefiting from commission, rate or policy enhancements.”


About Towergate

Launched in 1997 Towergate is the UK’s largest independently owned insurance intermediary, generating £3 billion of pro forma gross written premiums across its companies and employing c. 4,400 people across 100 UK offices.

Towergate is an important distribution channel for a significant range of insurance products and a key strategic partner for the UK’s largest insurers.

Towergate’s scale, customer insight and distribution relationships make it a unique business and a leader in the markets in which it operates. Its combination of distribution and underwriting gives it unparalleled consumer data and market insight.

Towergate reports in five core divisions:

  • Insurance Brokers – Towergate Insurance Brokers distributes specialised personal lines and products, and more general products aimed at SMEs through around 80 broking offices located across the United Kingdom.
  • Underwriting – Towergate’s underwriting division is the UK’s largest MGA, providing specialist insurance products for brokers, without taking the ultimate capital risk. The MGA has c. £660 million GWP under management.
  • Direct – Towergate Direct sells specialist Personal Lines and SME products primarily through telephony and digital distribution channels.
  • Paymentshield – Paymentshield is the leading provider of insurance products to mortgage brokers.
  • Network– Broker Network is the largest network for insurance brokers in the UK. The brand remains the leading proposition in the market in terms of size and breadth of service with c. 575 members.

* Notes to financial statements

Financials are from the Q2 Quarterly Report, adjusted for costs associated with running the board prior to the Group financial restructuring Restatement of accounts: 2014 and 2015 results have been restated to reflect a number of accounting adjustments and disposals, to enable a like-for-like comparison.

Business unit transfers: Divisional results for prior periods have been restated following a number of small business transfers between divisions, to enable a like-for-like comparison.

Disclaimer

This document may contain forward looking statements in relation to certain of Towergate’s plans and current goals and expectations, in particular but not limited to its future financial condition, performance and results. By their very nature, all forward looking statements involve risk and uncertainty because they relate to future events and circumstances which are beyond Towergate’s control, including but not limited to insurance pricing, interest and exchange rates, inflation, competition and market structure, acquisitions and disposals, and regulation, tax and other legislative changes in those jurisdictions in which Towergate, its subsidiaries and affiliates operate. As a result, Towergate’s actual future financial condition, performance and results may differ materially from the plans, goals and expectations set out in any forward looking statement made by Towergate. Towergate has no obligation to update any forward looking statement contained in this document or any other document or any other forward looking statement Towergate may make. All subsequent written or oral forward looking statements attributable to Towergate or to persons acting on its behalf should be interpreted as being qualified by the cautionary statements included herein. As a result, undue reliance on these forward looking statements should not be placed.

Past performance cannot be relied upon as a guide to future performance.

No representation or warranty, express or implied, is or will be made in relation to the accuracy, fairness or completeness of the information or opinions made in this document, which information and opinions should not be relied or acted on, whether by persons who do not have professional experience in matters relating to investments or persons who do have such experience. The information and opinions contained in this document have not been audited or necessarily prepared in accordance with international financial reporting standards and are subject to change without notice. No responsibility or liability whatsoever is or will be accepted by Towergate, its subsidiaries or affiliates or by any of its officers, directors, employees or agents for any loss howsoever arising, directly or indirectly, from any use of this document or its contents or attendance at any associated presentation.

Associated Files

Towergate HY 2015 Press Release


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Kelly-Ann Knight - Corporate Communications Director

Towergate Insurance Limited

Email: kelly-ann.knight@towergate.co.uk