The MGA reported a 97% drop in profit commission over 2013

Managing general agent (MGA) Arista has reported a 58% drop in operating profit over 2013 as profit commission is hit hard, according to Companies House filings.

Arista generated an operating profit of £477,255 over 2013, compared to £1.3m in 2012.

This was largely driven by a 97% drop in profit commission to just £17,600 for the year ended 31 December 2013, compared to £556,812 for the previous 12 months.

In his written statement in the company’s annual report, chief executive Charles Earle said the challenging motor fleet market had been the main cause of the downturn in profits.

“For Arista and many others in 2013 the underwriting challenge was most strongly felt in the motor fleet arena, where those competitive pressures often depressed premium while claims inflation and claims management companies’ activities placed upwards pressure on the level of claims,” he said.

“Our service proposition has proved less effective in attracting well rated business in the current motor fleet environment and we instituted a major re-underwriting of the motor fleet portfolio early in 2013.”

Towergate will hope this change to the underwriting practices of the MGA will help improve its performance after confirming the purchase of Arista for an undisclosed price in April.

And Earle said the changes had already started to bear fruit, but that motor fleet was making up a smaller percentage of business than the MGA had previously experienced.

“Underwriting tools embedded in our core systems and a disciplined, controlled and measured approach are achieving better technical prices and real rate increases,” he said. “In the second half of 2013 significant improvements in performance were emerging, albeit with significant reductions in motor fleet income.”