BIBA pleased as private equity deal brings end to uncertainty
Brokers believe that US private equity firm GTCR’s acquisition of Premium Credit is an affirmation of faith in the broking industry.
GTCR bought the premium finance provider for £900m from Bank of America affiliate MBNA Europe earlier today.
Bluefin chief executive Stuart Reid, whose company has a large account with Premium Credit as well as doing business with its rival Close Premium Finance (CPF), applauded GTCR’s confidence to invest in the market.
“They are very important to us,” he said. “They are a good stream of income.”
Reid said that while the FSA had premium finance in its sights, the regulator was primarily concerned with the bigger picture of how the broker positioned itself with their client and the business they were doing, of which premium finance was a part.
He said it was a tough market for premium finance providers with people more likely to want to pay their premiums up front than spread over a period of time. But he added that the business his company had done with Premium Credit and CPF so far this year had increased.
“Whether that is because we have sold it better or clients desire it more is very difficult to work out,” he said.
“But it is definitely an affirmation in the market and while it is a tough time hopefully if and when interest rates rise, then that will make it much better for them.”
Reid said that broking provided a steady stream of clients for premium finance, in return premium finance was a good source of revenue for brokers.
Biba’s head of corporate affairs Graeme Trudgill said he was pleased the Premium Credit had been concluded.
Biba itself extended its endorsement deal with Premium Credit for a further three years in May. It is the only premium finance provider recommended by Biba to its members and has been endorsed by the trade body for more than 10 years.
Trudgill said: “The Premium Credit sale has been discussed for some time and to achieve this is very positive news.
“It is business as usual for our broker members in terms of what they see and now we have got greater certainty going forward so we are really happy about it.
“We have had a very healthy relationship with Premium Credit and I think this gives us confidence in the future to carry on that partnership.
“It is important that customers have access to premium finance in difficult times. In terms of cash flow it is an important product and something that our members can offer as added value. We just want to make sure the product works long term and I am sure it will.”
Lark managing director Stephen Lark, who is also a client of Premium Credit, said the move was an affirmation of faith in the broking market in light of the FSA’s premium credit probe.
“As always with these situations I’m sure there are some brokers whose commission earnings are probably a bit high on ocassions, but I suspect for the vast majority of the brokers who do a lot of work in arranging these things and there is a small margin in it for them, then I can’t see any reason why that wouldn’t be deemed to be fair and they could carry on,” he said.
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