Lloyd’s broker attributes brokerage growth to focus on emerging markets

Lloyd’s broker RFIB’s brokerage for the year ended 30 June 2010 was up 15% compared with the 2008/09 financial year, despite soft rates, heavy competition and low organic growth at its larger rivals.

“It is a solid result given there were no company acquisitions or any other major drivers,” RFIB chief executive Marshall King said. “The increase has been driven by organic growth plus the coming to fruition of major investments in people over the past several years.”

Total turnover increased 13% to £43.5m in 2009/10 from £38.3m the previous year. The turnover growth rate was lower than that for brokerage because of a decline in interest income.

Operating profit increased 17% to £3.5m from £3m, and earnings before interest, tax, depreciation and amortisation were up 6% to £5.7m from £5.4m. The growth came despite higher expenses driven by investment in a larger London office, IT infrastructure and new offices in Bermuda and Australia.

Profit before tax fell 32% to £3.2m from £4.7m, although the 2008/09 figure had been inflated by a one-off profit of £1.5m from the sale of two non-core businesses.

King attributed his company’s ability to grow organically when others were struggling in part to its focus on emerging markets, which are experiencing an increase in insurance penetration. He pointed to the Middle East, eastern Europe, Scandinavia and South Africa as particular areas of growth.

He added that the Bermudian and London market reinsurance activities had also shown strong growth. “We’re picking up some people from the big brokers, but the bigger issue is that many of our clients like to work with smaller, more attentive, customer-focused brokers,” he said. “There are a number of quality players in the mid-market and most are showing reasonable growth and profitability. That is in contrast to the leading three brokers, which are finding it quite tough to grow organically.”

Last month, RFIB announced plans to double turnover to £80m within five years. King said there was a “reasonable possibility” that acquisitions would play a part in this. “We are keeping our eyes open for suitable opportunities,” he said.

When asked if RFIB itself might be a target, King added: “Good mid-market firms are probably always on the radar screen of some of the big players, but our focus is to grow the company ourselves and we are not looking for interest from any party.”