Broker Network chief executive Grant Ellis has steered the company to a record profit and a growing list of members. But now he’s on the acquisition trail. Andrew Holt reports
Broker Network has come along way. It continues to grow its membership and the changing nature of the market with ongoing consolidation puts it in a strong position to exploit the vagaries of the broking market. Slade Edwards has been its latest broker member joining, bringing the total number of firms recruited to the network to 169. The aim is for there to be 250 by next summer.
Grant Ellis, Broker Network chief executive, says: We expect to have 250 members by the middle of 2008 and continue to recruit around 60 new members a year. We believe that there is a real growth in appetite from brokers wanting to join networks.”
With expectations of performance are always more realistic in a soft market and consolidation within the broker market continuing, the network has experienced an increased interest in the number of firms wishing to join the group.
“People are worried about the gap between the commissions being negotiated by the consolidators and what they can earn on their own,” he says.
“This is having a knock-on effect on the number of firms wanting to join a network. We can also help with things such as compliance, IT and HR. So while we are still looking to make acquisitions, and are in discussions with a few companies on this, we are focusing heavily on the network.”
In the six months ended 31 October 2006, Broker Network Holdings reported a 71% growth in profit before tax to £1.94m from £1.13m a year earlier.
Operating profit grew by 108% to £2.4m from £0.98m in the previous year. The retail arm reported a 166% increase in turnover to £6m. It has risen 11 places to enter the Insurance Times Top 50 broker list at 48, based on an increase in brokerage of 65.2%.
This is based on one of the biggest moves made by the Broker Network when it acquired Towry Law Insurance Brokers last June, proving that Broker Network can punch above its weight.
The acquisition, for £12.5m, was made in conjunction with a consortium of Towry Law’s management team, led by managing director Martin Wright, who takes a 25% share of the business. Towry Law controls more than £50m of premiums, an indication of how big the deal was.
“People are worried about the gap between the commissions being negotiated by the consolidators and what they can earn on their own
“Our takeover of Towry Law made some people take notice, but it was a good deal for us and them. It has really boosted out brokerage and we are looking at doing some similar deals in the future on this scale,” says Ellis.
Until then, Broker Network’s acquisitions had been mostly of brokers under £10m premium income. “It demonstrates the rapidly growing strength of the group,” says Ellis.
Membership of Broker Network brings substantial additional benefits, even to a firm of its [Towry Law] size.”
Towry Law has since been rebranded as TL Risk Solutions.
Ellis predicts that this deal has boosted the Broker Network so much that when a full year’s business figures are filed that include TL Risk Solutions, it could put the network in the top 10 of the Insurance Times broker list.
“It really boosts our position significantly. But as I say, it is not the last big acquisition we will make.”
Ellis added that the acquisition had made the company a top 10 medical insurance broker and future acquisitions in the sector were possible. “We are interested in acquiring a healthcare broker and there are a few potential acquisitions out there,” said Ellis. “It is a small community, but it is a market which needs shaking up.”
The Broker Network launched its own graduate training scheme after Ellis criticised the industry for being “too slow on its feet” to address the skills crisis. The scheme, Career Start, offers places to under-graduates who wish to take a year out of their course.
“Our takeover of Towry Law made some people take notice
Ellis says he had launched the scheme because he had grown tired of waiting for the industry to act. He said despite the CII being committed to attract young professionals to the industry, it would be “some time” before brokers would see the benefits.
“The industry is moving on this, but I was finding it hard to recruit graduates. Waiting for others to act is not good enough,” he says.
The scheme offers four students, taking a year out of their four-year business course, the opportunity to experience working life in all divisions of Broker Network's headquarters. The undergraduates then are offered monthly retainers when they return to university to tempt them back to work for Broker Network once they have graduated.
But while the network continues to grow in both members and through acquisitions what does he make of some development in the market, for example the AXA takeover of three strong commercial brokers: Layton Blackham, Stuart Alexander and Smart & Cook? Isn’t this major threat to the broker community?
“No. Not at all,” he says dismissively. “It is just another development in the evolution of broking. Those brokers who move with the times are the ones who will benefit and survive. The only concern I have with this deal is how will the companies keep going when the present chief executives retire? They have been the driving forces behind each business.”
But what about the broker being owned by an insurer? Isn’t there a potential conflict of interest with the broker placing business with its parent insurer company? He again bats this away. “The market is far too competitive for brokers to be giving business to chosen insurers whether they are owned by them or not.”
This is an interesting perspective given that Broker Network could exploit the situation by being more critical, given the riches of insurers is arguably helping to create an even bigger divide between the broking ‘haves’ and ‘have nots’.
But Ellis says: “We support those who are ‘have nots’. We exist for them and help them become ‘have’ brokers. If they join us they will benefit from being part of our network.”
It seems by the number of brokers joining the Broker Network many are listening to Ellis’s message.
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