SSP EBITDA up 14% despite broker revenue dip

Insurance technology provider SSP has reported a 14% increase in operating profits despite a dip in revenues at its broker division.

SSP’s earnings before interest, tax, depreciation and amortisation (EBITDA) for the year to 31 March 2012 was £17.9m, up 13.8% from the £15.8m it posted in the previous financial year.

This was despite almost flat revenues of £71.7m (2011: £71m). The EBITDA margin (EBITDA as a percentage of revenue) was 25% (2011: 22.2%).

The results exclude the Keychoice Underwriting MGA business, which has been transferred to Towergate.

The company’s broker division, its largest unit, reported a 2% drop in revenues to £50.2m (2011: £51.4m). However, this was offset by an 8.2% increase in revenues from the insurer division to £21.5m (2011: £19.8m).

SSP chief executive Laurence Walker said the improving profitability despite flat revenues was partly down to the company’s shift to a subscription charging model for its services away from a licencing model. He also attributed the EBITDA growth to investment in products, services and people.

“SSP has emerged from this investment period with new products and services to address the new challenges in the global insurance technology market,” Walker said in a statement.“Our new subscription based revenue model has provided us with even higher levels of recurring revenue, which gives us greater predictability in our earnings and consequently underpins the long term future of the business.”

Walker told Insurance Times that the decrease in broker division revenues was a blip rather than a trend, as there were prospects to win more revenues from larger broking houses as they seek cost savings from the acquisitions they have made.

Walker added that SSP is still seeking a replacement for departed broker managing director Steve Bow. Walker is conducting Bow’s duties in the interim. “This is a relatively specialist and complex market so we want to make sure we make the right decision,” Walker said.

On a statutory accounting basis, SSP’s UK holding company, H&F Sensor EquityCo, made a £22.1m loss in the year to 31 March 2011. This was mainly caused by a £29m interest bill, although the bulk of this interest, £22.5m, does not have to be paid to private equity investor Hellman & Friedman until 2028.

The company has yet to file its statutory accounts for the current financial year.