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Broker Network begins to stand out

• FROM: July 2006 |
• TAGS: support services, broker network |
• COMMENTS: Add yours

• Broker Network begins to stand out
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Insurance broker and network operator Broker Network is beginning to be oticed by the market and the shares have performed strongly this year. The acquisition of Towry Law’s insurance broking operations will make more people take note.

In effect Broker Network is backing a management buyout of the business and taking a 75% stake for £12.5m. It will then buy the management’s share in five years for a figure that will be based on performance. The business will be included for 10 months of this financial period and is expected to contribute £1m after interest charges.

The purchase also takes Broker Network into the healthcare sector for the firsttime. This could provide a second avenue of expansion. There are gross written premiums of £10m in the healthcare business.

The network has 142 independent members and 19 owned by Broker Network. They account for £400m of premiums with owned businesses contributing nearly one-quarter of these. Premiums are falling but margins are improving because members are retaining a larger percentage of the premium due to economies of scale.

The purchase price is being funded by debt. Although net debt is forecast at £12m by the end of April next year interest payments will be covered 11 times. Based on forecast profits of £4.8m for the year to April 2007 the shares are trading on a prospective P/E of seven.

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