Broking group Brightside reports sharp profit drop for 2016 after ‘tough year’
Broking group Brightside reported a 44% drop in underlying profit in 2016 but is showing signs of recovery in the first half of 2017.
Brightside reported earnings before interest, tax, depreciation and amortisation (EBITDA) of £3.9m in 2016, down from the £7m it reported in 2015.
Among the causes was a 17% drop in revenue to £49.4m (2015: £59.4m) as Markerstudy’s withdrawal of personal motor capacity from the broker in May 2016 took its toll.
The company also continued to invest in improving its systems and processes, including switching to automated fraud validation from manual validation. Under the manual validation, 35% of Brightside’s private car policies were affected by fraud, meaning insurers were penalising the company. But with the new system, which uses data enrichment at point of quote, fraud levels have fallen to 1.7%.
Brightside chief executive Mark Cliff told Insurance Times: “We always said 2016 would be a tough year because there were so many areas that we needed to fix or transform. 2016’s results reflect that. EBITDA was down, turnover was down. We were still shrinking customer numbers.”
Signs of improvement
But he added that 2016 was “the bottom of the trough” and that the work done during that year was now starting to pay off.
Alongside its full-year 2016 results, Brightside reported that its first-half 2017 EBITDA was up 57% to £2.6m (H1 2016: £1.7m) and that the group’s policy count had grown in the first half of 2017 for the first time in four years.
Customer retention in the company’s private motor business has now increased to between 65% and 70% from 20% at the beginning of 2016.
Brightside has also rebuilt its capacity since losing Markerstudy. Cliff said that since Markerstudy exited, the broker has added 19 new insurers to its van and personal motor business, and added a further six insurers on the commercial side.
The company has also secured capacity for its planned MGA, launching next year, and has extended its lead transfer contract with insurer RSA’s direct personal lines brand More Than.
The contract, which sees Brightside take on business that does not fit More Than’s underwriting appetite, is expected to run through until 2020 if a one-year pilot is successful.
Cliff said: “We do that for a number of the direct insurers. That area is growing.”