Towergate feeling benefit of cost-cutting measures

A COST-CUTTING drive spearheaded by new chief executive Mark Hodges helped Towergate Insurance improve its operating performance in the first half of 2012.

The privately owned group reported 5 per cent growth in earnings to £80.6m in the six months to June 30, driven by a 3 per cent reduction in spending.

Mr Hodges, the former head of Aviva UK, told the Yorkshire Post he is focusing on making the privately-owned group more effective and more efficient.

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“It’s a relatively young business,” he said. “We are bringing in some procurement discipline, tidying up the property portfolio, harmonising the IT system and improving processes.”

He added: “There is a lot more potential in this business we can exploit.”

Towgerate is an industry consolidator and has acquired more than 250 underwriting and broking firms since entrepreneur Peter Cullum founded the company in 1997.

Mr Hodges said the group made 10 acquisitions in the first half and 15 in the year to date.

Towergate has a £90m warchest to grow the business and is on the hunt for niche or specialist insurers. In July it bought Aire Valley Insurance in Silsden, which specialises in insuring Honda Goldwing touring motorcycles.

Mr Hodges said Towergate will continue to make more “business as usual” acquisitions, while “there’s a lot more to go after in terms of organic growth”.

Results out yesterday revealed an eight per cent increase in gross written premiums to £1.58bn. Income was steady at £219m.

The group recorded a pre-tax loss in the period of £25.1m, which included a goodwill amortisation charge of £31.1m and exceptional costs resulting from Mr Hodge’s organisational changes.

The goodwill charge relates to the cost of acquisitions that the group has to account for under UK accounting rules.

Spokeswoman Kelly-Ann Knight said headcount has remained broadly flat at Towergate.

She said the ongoing change programme is more about “nipping, tucking and tweaking” than total overhaul.

The group has 5,500 staff across 120 locations, including 300 people in Yorkshire.

Private equity firm Advent International took a 45 per cent stake in the business in February 2011 and last September hired Mr Hodges, who was seen as a future global CEO of Aviva.

He spent most of his career with Norwich Union and then Aviva and is the former head of its York-based life business.

He said: “I miss York, it is a fabulous place to live and work. I came here because this is a great opportunity.”

Towergate has said it will consider floating on the stock market when the time is right.