End of lucrative Paymentshield contract drags down first quarter
Pre-tax losses at Towergate worsened by 41% to £26.6m (2013: £18.9m) in the first three months of the year.
Its latest report to bondholders, published today, also reveals that adjusted EBITDA fell 26% to £24.7m (2013: £33.1m) as three of its five divisions posted a double-digit deterioration.
The worst performer was Paymentshield, which has been hit by the end of a deal with RSA that saw the insurer pay £40m to underwrite a block of household business for five years, and the run off of its mortgage payment protection book. Operating profit fell by £3.7m to £9m.
Operating profits at its Insurance Brokers division fell 22% to £7.2m, despite a rise in turnover. Towergate said strong income from acquisitions had offset lower organic retention and new business.
Towergate spent £3.6m on five acquisitions, comprising one company and four books of business, in the first three months of the year.
The results also revealed a one-off write down of £213,000 from aborted acquisition and disposal costs.
The Networks division showed the best improvement, with operating profits up 26% to £1.8m, while turnover increased by 10.2% thanks to higher insurer service fees.
Meanwhile, the acquisition of classic car broker Footman James helped drive up turnover of the Direct division by 7.3% to £15.7m.
Although four of the five divisions grew their turnover in first quarter of the year, Paymentshield’s decline dragged down group turnover by 4% to £101.5m.
The report also revealed a £12.1m cash injection at the end of March from shareholders.
Speaking to Insurance Times last month, group chief executive Mark Hodges said that the changes Towergate is making such as restructuring retail broking, setting up a call centre for small premium SME business, and strengthening group controls, would start to pay off later this and next year.
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