FSA probe holds no fear, says premium finance boss

Premium Credit’s new chief executive Andrew Doman (pictured) believes that brokers have nothing to fear from the FSA’s probe into premium finance deals.

Doman welcomed the FSA’s investigation into the deals, which include add-on charges from brokers, saying he was all for transparency.

“There is certainly nothing to hide in this business in our view,” he said. “From a broker perspective it (the add-ons) is something they need to disclose when clients sign up for their premium finance.

“I don’t think brokers have anything to be concerned about their role in providing the premium finance facility for their clients. This is normal business practice.”

Doman said the company’s acquisition by private equity firm GTCR this week was the “start of a new era”.

He believes that the deal, which includes a £1bn securitised loan facility, will provide the premium finance firm with significant growth opportunities in new and existing markets.

Doman said that Premium Credit was also looking to increase its head count and was in the process of appointing a new chief operating officer.

He added that the firm would be looking at a number of acquisitions over the next year.

“This is really good news,” he said. “We have got tremendous backing, we have got an ‘A’ rating and terrific support from the banking community.”

Doman said GTCR was focused on growth and, following a period of uncertainty when Bank of America affiliate MBNA Europe was trying to sell Premium Credit, the private equity firm had come in with substantial investment and had given the management team its full backing.

“This all about accelerating growth,” Doman said. “GTCR is a growth-oriented private equity firm with £8bn currently invested in businesses around the world and we see a lot of opportunities out there in the market.

“There was a period of uncertainty about Premium Credit in the past few years which Bank of America allowed to continue.

“But this is a new era. Now we have got complete certainty about the ownership of the business and we have got a new owner who wants to support us and has set aside substantial additional capital for that purpose, as well as further capital for growth and acquisitions.”

Doman said he saw opportunities in both the primary recourse lending and school fees market, as well as in payments, with Premium Credit processing more than 20 million payments a year.

“One of the main reasons why I was attracted to joining the business and invest in it was that this is the time for firms like Premium Credit who essentially provide cash flow smoothing for hard-pressed families and small and medium-sized businesses to help them get access to insurance services or make substantial payments like school fees that they wouldn’t be able to do with cash flow,” he said.

“The rates that we lend to people are very reasonable compared to the likes of Wonga.com or some of the banks or credit card providers.

“We are a socially very important business in the UK and Ireland market, particularly in tough times.”

Doman said Premium Credit would initially focus on openings in the insurance market, with around 30% of motor and household policyholders using premium finance – a number which he expects to rise in the current economic environment.

Over the past year Premium Credit has advanced more than £3bn in loans to its customers – a record amount for the company – and Doman is keen to grow that book.

“We see that as a huge opportunity going forward, to partner with our broker intermediaries,” he said.

“We also see opportunities to work much more closely with insurance companies and aggregators to help them improve the penetration of premium finance services.”

Doman stressed that his priority was to get out and meet clients and to make operational improvements to the business.

He said the deal would provide a boost to Premium Credit’s broker partners and looked forward to doing more business in the future with them.

“Our business is to serve those intermediaries and make sure that they have the full range of choices available to their client base and to make it as easy as possible for them to offer cash flow smoothing services,” Doman said.

“Providing premium finance services in the UK is a very competitive business, but we feel that what we offer is the real value that brokers and their clients look for.”

Doman added that GTCR had no sell-off strategy for Premium Credit or plans for an IPO.