Towergate income falls in Q1 amid legacy issues

Towergate has posted a 6.9 percent fall in its income for the first quarter of the year.

The UK insurance group posted an income of £79.8 million in the first quarter of 2016, compared with £82.5 million in the first quarter of last year.

The firm’s income was affected by an 8.7 percent increase in operating expenses and a 1.2 percent increase in staff-related expenses, as well as legacy issues.

Its income fell in all sectors of the business. Most affected was its underwriting income, which fell by 13.9 percent, followed by Paymentshield (10.5 percent) and insurance broking (3.5 percent).

Towergate’s earnings before interest, taxes, depreciation and amortization (EBITA) decreased by a dramatic 20.6 percent to £13.6 million in the first quarter of the year, compared with £17.2 million in the first quarter of 2015.

The firm said it has delivered on its cost saving initiative, however, ahead of schedule, completing more than have of its £30 million target.

Underwriting income for the period continued to be impacted by a challenging rate environment and competitive landscape, according to Towergate, particularly on new business. This was in addition to previously disclosed headwinds which the firm said it expects to abate during the second half of the year.

Towergate said the team has made progress towards stabilising the core business, however, with “significant improvements” in retention in its commercial business and a number of new capacity deals signed.

Paymentshield income shortfalls have been driven by declining back books, in line with expectations, according to the firm. However, it said new business volumes have grown by 13 percent overall with over 25 percent growth in new business across its panel, following an investment in sales resources in the fourth quarter of 2015.

Excluding SME call centres, Towergate said the performance of its insurance broking sector was broadly in line with 2015, but with steadily improving retention and new business rates. Costs savings achieved to date have enabled reinvestment in more than 30 sales staff, according to the firm.

David Ross, chief executive officer, Towergate, said: “Our underlying performance is ahead of expectations with these results impacted by well-known legacy issues. I am pleased that the encouraging progress across the business that we reported at the full year has continued into the first quarter of 2016.

“We are making solid progress towards fixing the infrastructure and legacy issues of our business whilst ensuring we rebuild and grow a Towergate of which we can all be proud. There’s plenty more to do and our focus remains on making sustainable improvements over time.”