Broker News: Brightside Posts Financials, Digital Transformation Well Underway

Brightside Insurance Services Ltd [‘BISL’] EBITDA climbed by over £3.15m to £4.81m (2017: £1.67m), with GWP up to £106m, according to 2018 accounts to be submitted to Companies House. Income (not including IQED) was up 4% in 2018.

Overall, Brightside Group EBITDA showed a slight increase to £5.6m (2018: £5.1m), although overall group revenue fell £17% as a result of the 2017 restructure of IQED, the Group’s medical reporting business. Group loss before tax was flat at £10.3m (2017: £10.2m).

Results Commentary

Group chief executive Brendan McCafferty said he was pleased with a sustained improvement in the South West-based broker’s performance. “We have seen month on month new business growth across our motor book, which delivered double-digit sales increases last year, especially in Brightside Van, and has accelerated this year. We have improved the performance of our SME book in Southampton, and I’m happy with the start made by Kitsune, our MGA.

He announced that the Group is to embark on a £multi-million investment programme in three core areas: pricing/analytics, Kitsune (MGA), and operational excellence. “Already, 60% of our business is conducted online, but I want to accelerate our digital offer. This new investment will further improve profitability and service levels, both of which are key to achieving our strategy of building a successful niche, digital and scale business for the 2020s.”

He said that, although the investment is primarily targeted at process improvements, the impact will be “to improve customers’ interaction with Brightside at all levels, and make it easier for Brightside employees to do a great job each and every day.”

Business review: Broking

Mr McCafferty commented:

“In a challenging personal lines market, our investment in data enrichment and award-winning data analytics has benefitted our insurer panel, as evidenced by improving revenue and a further increase in GWP to over £106m (2017: £99m).”

He drew attention to particular highlights, including operational improvements that have pushed Brightside’s Trustpilot scores to an average of 8.0 during the last few months at Brightside’s Bristol HQ.

“Brightside Car continues to improve. The book grew by nearly 15% in 2018 with policy count ending last year at just under 50,000. Brightside Van policy count grew by over 50% in 2018, while our niche motor book which includes minibus and taxi also grew, by 4%, in 2018.”

Mr McCafferty said: “Growth is to be welcomed, but profitable underwriting remains my absolute priority, and to emphasise this ongoing commitment I have earmarked substantial new investment in pricing and analytics expertise, including new technology, new talent and consulting support.”

Commercial/SME

Mr McCafferty said the commercial/SME book accounts for over 20% of GWP, underlining the continued evolution of the business into a multi-niche broker.

“We distribute a broad suite of niche and specialist products, and in our lead transfer business we believe we are market leading. We handle lead transfer for two Tier One insurers from our Southampton office, utilising our fast-growing innovative digital solution for commercial broking, including online platforms for public liability, property owners and package policies; product ranges long considered restricted to offline broking. As a result, online policy count has risen by 50% year on year.”

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Brightside Car and van insurance book continues to grow

Kitsune/MGA

The launch of MGA Kitsune in January was a major milestone for the Group, Mr McCafferty noted. “We always said we want Kitsune to become famous for measured growth and writing profitable business for our capacity partners and that’s exactly what we’re doing.”

Operations

Mr McCafferty welcomed Richard Beaven’s arrival as Group COO in April, and Derek Henry’s appointment as MD Broking in August. “Richard’s appointment was a signal that re-organising operations and processes to improve service levels is a key focus for us and this area will account for the third tranche of our investment. With Derek joining us in September, I am confident that we have the right blend of experience and strategic nous to steer Brightside into the next decade.”

Brightside Group

Group revenue fell by 14% to £36m, as a result of IQED, the Group’s medical reporting business, having its status changed by MedCo from a Tier 1 to Tier 2 firm in 2017. Mr McCafferty explained that, as a result, the Board took the view that the right course of action was to reduce the Group’s dependency on a non-core line and it has now closed to new business.

Brightside Group reported a loss before tax of £10.3m (2017: £10.2m). This was due primarily to depreciation and amortisation (£4.3m), and set up costs for Kitsune (£1.4m). Impairment charges were £7.3m (2017: £2.3m), due to a goodwill writedown for IQED and a decision to scale down GAP insurance.

Overall Group EBITDA for 2018 is £5.6m (2017: £5.1m). Total revenue for 2018 fell 17% to £36.1m (2018: £42.1m), largely as a result of the restructure of IQED.

Outlook

Mr McCafferty said: “Uncertainty driven by change is now the natural order of things in our industry as we approach the new decade, and so far this year, our sector has seen a new discount rate, the dual pricing review and the FCA announcing a thematic review of distribution.

To thrive in uncertainty, a clear sense of purpose is vital, and our strategic aim is exactly the same as it was when I joined Brightside in 2018, namely scale to invest and grow, putting digital at the heart of the business and a focus on niches.

“We are now completing the final part of our plan to set the business on the path to sustained performance, but that is a precursor to what comes next with our new investment in Brightside.”

“Brightside’s fundamentals are good, evidenced by dramatic uplifts in policy count, but the accounting always lags performance improvements and will take time to catch up”

“We will continue to report one off costs in 2019 as a result of further investment, but we are firmly focused on 2021 when I expect our report and accounts to fully reflect the results of our transformation into a successful 2020s broker.”

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