'Towergate shareholders should be very concerned about what the future holds'

These are challenging days over at Towergate. Network turnover is falling and broking revenues for the year to date remain flat despite 19 acquisitions in the first nine months of 2012. Chief executive Mark Hodges believes the revenues from these buy-outs will take time to kick in.

He better hope it happens because the consolidator badly needs a boost. Insurers are playing hardball with Towergate, walking away from network deals and putting pressure on commissions.

Meanwhile, the economic downturn is making the turnaround all the more difficult. And in the background is the grim reaper that could finally break apart the business, namely nearly £1bn worth of debt.

Rating agency Fitch rates Towergate’s ability to honour its bond payments in the junk category. Towergate will have to repay these gigantic debts in 2017, 2018 and 2019.

Then there’s Hodges. He can’t seem to articulate a long-term vision for the company. Hodges arrived from Aviva UK with a strong reputation, but so far he’s been uninspirational.

The best you can say about his efforts to date is that he’s successfully cut costs to grow earnings. Perhaps Hodges’s gameplan is to hope rates will harden and the animal spirits will once again return to the stock markets, paving the way for a much needed flotation. But that day may never happen.

Investors are excited about firms with access to the growth markets of South America and Asia and, increasingly, Africa, not a debt-laden broker in a struggling UK economy. Towergate shareholders should be very concerned about what the future holds.

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Some people within the government think insurers are charities, expecting them to cover even the riskiest flood-prone homes at a reasonable premium. So it’s no wonder talks over a new flood plan to replace the Statement of Principles have broken down. What might finally push the government into a deal are attacks from the opposition and public pressure.