Network held back Towergate earnings, chief says

Lower results in Towergate’s network division held back group operating earnings by about 3% in the first half, chief executive Mark Hodges has said.

The consolidator posted operating earnings of £80.6m in the H1 2013, roughly the same as the £80.9m it recorded in the same period last year, while revenue rose by a modest 3% to £225m.

“Operating earnings are in line with last year,” Hodges said. “It reflects the good performance in three divisions and the fact that, year-on-year, network dipped. The network effect on Ebitda [earnings before interest, tax, depreciation and amortisation] is probably about 3%.”

The network division’s operating earnings tumbled 42% to £3.1m in the six months up to June (£5.3m H1 2012), while its income fell 27% to £6.4m (£8.8m H1 2012).

“It’s a big dip in percentage terms but in numbers terms it’s our smallest division,” said Hodges. “Some of our relationships with some insurers have changed and that has affected income. Some insurers pulled out of the network and others are coming into the network.”

Towergate also posted a £9.9m before tax loss in H1 2012, down sharply from the £10.2m profit before tax seen in the first half last year.

Chief finance officer Scott Egan said: “The £9.9m loss was the result of writing off loan fees. The write-off was basically a consequence of the debt refinancing that we did earlier this year.”

Hodges said: “We have top-line growth in the business in terms of gross written premium (GWP), which has grown by 1% , and our income has grown by 3%. The market we serve is still a difficult environment and growing your income is a good result.”

In retail, revenue grew by 6% and operating earnings by 5%, in underwriting revenue was up 4% and operating earnings 3%, while Paymentshield’s operating earnings increased 5%.

Egan said Towergate also had a “continuing great story” in acquisitions, adding 10 new brokerages, including Waveney Insurance in Norwich, up to June, while the network division had struck new deals with RSA and QBE.

“The network division is the largest network in the country and, despite a reduction in profitability year-on-year, we believe it is still the most profitable network in the country, ” he added.