RFIB profit hit by £1.5m bad debt charge

Lloyd’s (re)insurance broker RFIB has reported a 44% drop in profit after tax, after paying off £1.5m of bad debts.

RFIB made a profit after tax of £1m for the year to 30 June 2011, down from £1.8m the previous financial year, mainly because of the one-off charge.

The company also incurred a restructuring charge of £257,000 following the closure of its UK construction unit and a company-wide cost review. RFIB chief executive Jonathan Turnbull said the construction unit was closed because it “didn’t deliver in line with the plan”.

In a Companies House filing, RFIB attributed the bad debt charge to “legacy funding issues”. Turnbull told Insurance Times the bad debts were discovered after the creation of a new database resulted in more detailed management information. Some of the debts were caused by RFIB’s clients and insurers offsetting payments against others, for example a client offsetting an outgoing premium payment to an insurer against an incoming claim payment and only paying the net amount.

“We have identified the issues and we have taken the hit in the 2011 year to reflect that,” Turnbull said. “We know the problem is now solved and there is nothing else that is going to come out of that.”

RFIB posted lower-than-expected revenue growth of 4% to £42.7m, from £41.2m.

Turnbull attributed the lower-than-expected growth partly to the closure of the UK construction business and partly to revenue that it was not able to book from its new Saudi Arabia office in the 2010/11 year of account, because its licence application was pending. “That had a material impact on the numbers we recorded to 30 June 2011,” Turnbull said.

RFIB announced that it had received the licence towards the end of June 2011. Turnbull said the Saudi revenue would be booked in the 2011/12 accounting year.

For the 2011/12 year of account, Turnbull is expecting revenues to pick up – partly because of the Saudi business, and partly thanks to a new property facultative team that joined RFIB in December.

“Our revenues are strong,” he said. “We are targeting just shy of £50m turnover for the year and we are on track.”