Chief executive says company will not bow to insurer demands for lower commissions, as partial 2007 results are revealed.
Towergate chief executive Andy Homer has said the company will scale back its acquisitions and focus on integration after it failed to hit its targets for organic growth in 2007.
Homer’s comments follow the partial release of it 2007 results, which detailed premium increases of 11% to £1.2bn, a 14.5% increase in brokerage to £278m, and a 13% rise in pre-tax earnings (EBITA) to almost £100m.
Towergate was unable to confirm whether it had achieved a pre-tax profit in 2007 because the full accounts have not been finalised. The full results will be posted in the autumn.
Homer said he was satisfied with the performance of the business, but admitted that the company’s retail broking arm had struggled to deliver organic growth, except in niche areas. He said: “We have targeted 4%-5% organic growth, depending on the line of business. There has been quite a spread; some have stood still.”
Homer said that Towergate had no plans to bow to insurer demands to lower commissions, although he confirmed that the group’s underwriting division, Towergate Underwriting, was in discussions with insurers.
“Insurers are concerned,” he said. “On the underwriting side there is pressure to reduce commissions. But nothing has been agreed for this year.”
Homer said that some of the group’s recent acquisitions had not grown as quickly as expected, but insisted they would deliver a strong performance in 2008. He added that he expected to spend around half of Towergate’s existing £100m war chest on brokers controlling premiums of up to £15m, and that it wanted to purchase another network.
“We will be focusing on smaller acquisitions. We have more than enough on our plate.
“We will be focusing on smaller acquisitions. We have more than enough on our plate,” he said.
The news follows deputy chairman Patrick Snowball’s resignation from the board after just one year at the company. No immediate replacement for Snowball, who stepped down after Towergate temporarily shelved its plans to float, is being made.
Snowball retains his position as chairman of Towergate Financial Services and told Insurance Times he was keen to take up an executive position at a major insurer.
"I've got one big project left in me," he said. "My skill set is substantially linked to UK general insurance. It probably won't be a listed company."
Homer said Towergate's plans to float would be delayed until the debt market recovers in the wake of the credit crunch. Towergate had previously blamed the collapse of its sale talks with private equity investor Candover on wider problems in the financial markets. Homer said the company did not intend to pursue any further refinacing this year.
Towergate last refinanced in November 2006 in a deal worth £580m. Last year, it secured a further line of credit from its bankers to conclude the £276m sale of Open International.
In 2006, Towergate posted a pre-tax profit of £10.7m following a loss of £41.8m the previous year.