RFIB delivers operating profit rally despite soft market
Lloyd's (re)insurance broker RFIB's operating profits for 2009 climbed 17 percent to £3.5mn while adjusted pre-tax income remained flat, as growth and profits remain under pressure for London independents.
RFIB's figures for the 12 months to 30 June are the latest in a series of full-year results from London's independent brokers that have been hit by the softening market and increasingly onerous financing obligations.
Pre-tax profits at privately held RFIB declined by 32 percent to £3.2mn ,as the exceptional £1.5mn gain from the disposal of two businesses, including Bridle Insurance Brokers in 2008/09, fell out of the profit/loss account.
Gross margins narrowed from 12.2 percent to 7.4 percent, although when allowing for the divestitures the 2009/10 gross margin only came in from 8.4 percent.
The broker reported a 15 percent increase in brokerage year-on-year.
However, overall turnover climbed by 13 percent to £43.5mn, with the difference explained by a sharp decline in investment income due to rock bottom interest rates.
Meanwhile, earnings before interest, tax and depreciation strengthened by 6 percent to £5.7mn.
Particularly strong growth was registered in Scandinavia (40 percent), Russia/Eastern Europe (22 percent) and Africa (20 percent).
But the company's largest segment, which covers the UK and Western Europe, also posted 15 percent growth.
RFIB said that growth was spread across a number of lines of business.
The company's specialty reinsurance sector, which brokers to captives in Bermuda and to carriers in the London market, was a star performer.
Another pillar of growth was the programmes and facilities business, where revenues were pushed up by increases in kidnap and ransom, fine art and North American binders' business.
RFIB's full audited accounts will be filed with Companies House in the near future.
Last month RFIB unveiled a five-year plan that it hopes will help it to double revenues and treble profits by 2015.
RFIB joins a group of independent brokers, also including Cooper Gay, BMS and Hyperion, known to be pressing on with rapid growth plans.
RFIB announced that it was looking to increase revenues to around £80mn by 2015.
A trebling of 2008/09 profits within the same timeframe would take profits to around £14mn and the company's margin to 17.5 percent.
The independent broker is not following a number of its peers and confining itself to organic growth.
Marshall King, group CEO of RFIB, told The Insurance Insider: "We are definitely on the lookout for acquisitions that have a strategic fit with our business and will accelerate our growth plans."
RFIB said that under its five-year plan its international division would concentrate on the Middle East, Eastern Europe and Southern Africa, where it already has a presence.
The market was also told that RFIB will "aggressively expand" its specialty reinsurance division, which works with London market carriers, captives and other risk retention groups across the world.
Further, the Lloyd's broker said that it will seek to grow its coverholder business in the US and Canada. Efforts will also be stepped up to develop coverholder business in Western Europe.
During the last two financial years RFIB has acquired new teams for construction, financial institutions and professional indemnity and workers' compensation.
It has also created a new team to deal with the placement of alternative reinsurance products.
In addition to these investments, the company has upgraded its IT infrastructure and relocated the business to new London offices.
RFIB has been 35 percent owned by private equity house FF&P Asset Management since 2007.
CEO King, a former chief executive of claims management firm Improveline, has been at the helm since September last year, when he took over from long-serving incumbent Patrick Holcroft.