Towergate Insurance Reports Q1 Net Income of $134 Million; Down 8%

Towergate Insurance reported first quarter income of £86 million ($134 million), down 8 percent from £93 million ($145 million) reported for the same period in 2014 – with its performance adversely affected by the group’s financial restructuring and change program.

The UK-based intermediary’s first quarter operating earnings decreased by 47 percent to £12 million ($18.7 million), compared with £23 million ($35.8 million) for the first quarter of 2014.

The company’s expense ratio came to 85.6 percent for the first quarter ended March 31, compared with 75.1 percent during the same period last year. The company said this 10.5 point increase in the expense ratio was due to a drop in organic income.

Operating margin was 14.4 percent for the first quarter of 2015, compared with 24.9 percent for the same period in 2014, a 10.5 point drop.

“In 2014, Towergate went through the perfect storm of both a challenging market backdrop and severe operational issues culminating in significant financial challenges,” said Scott Egan, interim group CEO.

“We are now firmly through the eye of that storm. Whilst the worst is behind us, the effects are not, and there is no doubt that 2015 will be a year of recovery,” he continued.

Egan noted that the first quarter reflects the period, prior to the completion of the financial restructuring, when confidence in Towergate was at its lowest, which had a substantial effect on new business and retention.

“We are now in a very different place. We have completed our financial restructuring, fundamentally improved our liquidity and capital structure and attracted long term supportive shareholders in Highbridge, KKR and Sankaty,” he said.

“We have now implemented much of the historic change program; have made two material disposals of non-core businesses, in Haywards and Towergate Financial, while integrating the acquisitions made last year,” Egan said.

“The fact that we have successfully retained the vast majority of clients and colleagues in such extremely tough times is testimony to the trust there is in Towergate. This has also been echoed in the support we have received from our core insurance partners, epitomized by the recent announcement in relation to the extension of our long term strategic partnership with Allianz,” he said.

The company provided an update on the progress made in its financial restructuring, which included the following activities:

• The group is back on a stable financial footing with a 60 percent reduction in net debt and £125 million ($194.7 million) liquidity injection following the completion on April 2 of the recapitalization
• The final part of the financial restructuring will see several, now economically inactive companies, including Towergate Partnership Co. Limited, go into liquidation
• Completed the sale of Towergate Financial to Palatine Private Equity, in line with strategic focus on core businesses following the earlier sale of Hayward Aviation to JLT
• Transition of business to the small business center in Manchester nearing completion
• Longterm five-year partnership agreed with Allianz totaling circa £770 million ($1.2 billion) gross written premium
• Enhanced management capability with Scott Egan appointed interim CEO and the recruitment of Mark Mugge as chief operating officer
• Janice Deakin will join the company on August 12 to headup the new retail broking division which encompasses all the Towergate Insurance retail broking businesses, Towergate Insurance Broking and Direct, across all their respective locations in the UK. Sarah Dalgarno joins as chief risk officer on September 4. All appointments are subject to regulatory consent
• John Tiner appointed as chairman to take effect from June 29.

Source: Towergate Insurance

Topics Profit Loss