Ageas-owned broker says it has rejected 22,000 applications since start of last year
Efforts to tackle fraud have eaten into the 2011 profits and revenue of Ageas-owned broker Kwik-Fit Financial Services (KFFS).
A 12% drop in turnover at KFFS to £84.9m (2010: £96.2m) meant that Ageas’s total UK broking revenue dipped 2% to £218.1m (2010: £222.2m), according to Companies House filings
Although KFFS swung to an £8.8m profit in 2011 from a £5m loss in 2010, the improvement was mostly caused by the non-recurrence of one-off charges.
Excluding exceptional items and restatements, KFFS’s £8.8m 2011 profit was down 14% on the £10.2m profit reported in the previous year.
KFFS attributed the falling revenue and like-for-like profitability to a challenging personal lines market and a £2m investment to reduce fraud. It said its fraud prevention campaign had resulted in less new business. Since January 2011, the company has rejected 22,000 applications that failed to meet its standards.
“The impact of fraud on insurers is well documented,” KFFS managing director June Lynch said. “And we have made a strategic decision to combat this and realign our customer profile to improve our competitiveness in a very tough market.
“These factors have combined to impact on profits in the short term, with a view to providing a solid foundation for future growth.”
Lynch added: “Our underlying business is extremely strong. We’ve taken deliberate steps to improve our business for insurers and customers alike, and we have the market presence and critical mass to deliver on the strategy we have set out.”
Other brokers within Ageas’s UK stable improved their performance in 2011. Over-50s specialist broker Castle Cover made a £2.3m profit in 2011, compared with a £1.3m loss the previous year.
While Castle Cover’s turnover was almost flat at £21.8m (2010: £21.9m), the company cut its cost of sales by 6.7% to £14.9m (2010: £16m) and trimmed administrative expenses by 18.3% to £5.5m (2010: £6.7m), pulling it back into an operating profit.
Fellow over-50s broker RIAS boosted profit by 12.5% to £20.7m (2010: £18.4m). And UKAIS’s profit after tax increased 29% to £1.8m (2010: £1.4m).
Pass notes: Ageas broking
How have Ageas’s UK broking operations performed this year?
In the first quarter of 2012, Ageas UK’s ‘other insurance’ division, which is mostly made up of the broking operations, boosted revenues by 3.1% to £52.8m. But profit before tax dropped 23% to £3.6m - thanks to the tough economic climate.
How important are Ageas’s UK broking operations to the company?
In 2011, they accounted for almost 11% of income, down from 12.2% the previous year.
How did Kwik-Fit Insurance Services incur a £13.4m charge?
As part of the sale agreement with Ageas, inter-company debt due to Kwik-Fit Insurance Services from sister firm Speedy 1 Ltd was written off, and the Premier 2 computer system owned by Kwik-Fit GB Ltd was transferred to Kwik-Fit Insurance Services. These two events prompted the £13.4m charge.