Hastings expands into household and Advantage finds a niche in motor following IAG sell-off

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Entrepreneur Tom Duggan and Towergate chairman Peter Cullum have backed the £23.5m management buy-out of Hastings Direct and Advantage with personal finance, Insurance Times understands.

Last month an MBO led by Ed Fitzmaurice, chief executive of Hastings and Equity Direct, and Keith Charlton, chief executive of Advantage Insurance, was completed following Australian insurer IAG’s decision to sell almost all its UK business, apart from Equity Red Star. Another business, Equity Insurance Brokers, was sold to Swinton at the same time (see box, right).

Duggan, who founded Oxford based broker A-Plan, would not confirm or deny his backing but said he was involved in “various management buy-outs” and expected an announcement to be made in due course.

Cullum has been heavily linked to the deal that will see his close friend Neil Utley become non-executive chairman of the group. The size of his investment is not known.

Private equity backers were also keen to invest, but pulled out when it was clear that Equity Insurance Brokers was not part of the buy-out.

Ed Fitzmaurice refused to comment on the individuals involved but said there were “several” investors with links to the insurance market. “It has been fantastic to get the support of people in the insurance sector. The fact that we have been backed by private investors is very much a testament to what people see in the business.”

Fitzmaurice said the business model for Hastings and Advantage would change. The Hastings business would set up a panel of insurers, rather than use Advantage almost exclusively, as it now does.

He said Advantage also would become a niche player in the motor market. “As we grow our panel with other insurers it will reduce its footprint to the areas it wants to specialise in.”

Hastings is also set to expand into household insurance, and Fitzmaurice would not rule out any other sector. “At the moment Hastings is very strong and we want to expand in to other areas.”

He also did not rule out bolt-on acquisitions. “For the next year or so the focus is very much about consolidating the business we have, before looking at acquisitions. If the time was right and the price was right we would certainly want to look at acquisitions in due course.”

Swinton secures equity chain

Swinton has strengthened its presence in the high street after buying 91 Equity-branded shops from Insurance Australia Group (IAG) for £50m.
Most of Equity’s 650 staff will be transferred to Swinton and all the shops will be rebranded, apart from Northern Ireland where they will keep the Open and Direct image.
The deal means Swinton now has 580 shops and 3.25m policies, with a workforce of 5,000. Swinton made profits of £48.7m last year on premium income of about £750m in 2007.
Patrick Smith, Swinton’s chief executive, said the company had bought “the last major high street broker”. He said Swinton, which secured the Equity deal with help from £175m Lloyds TSB funding, would now turn to “small brokers and small chains” to expand its personal lines business.
Smith said the Equity deal also had helped expand its commercial arm.
“We will be making acquisitions in commercial lines, as we have been doing in recent years to create regional hubs.
“Having bought Equity, it does have commercial business in a number of sites,” Smith said.
Swinton aims to exceed £150m in commercial gross premium income during the next three years.
Last year Swinton acquired a record 45 brokers, including three major commercial brokers Vectis, Rockford and Andinsure.
Its online business is also growing with 250,000 policies placed last year.