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| International Risk
Services |
| Overview |
The International Risk Services
(IRS) business continued to trade in difficult
conditions, including rate reductions experienced
in a number of insurance classes. In addition,
a number of unprofitable units were closed during
the year. Despite these downward pressures, revenues
were largely maintained and only decreased marginally.
Trading results from operations decreased to £1,6
million for the year, however a portion of the
downturn can be attributed to actions now in place
to restore profitability over the next two years.
Following a thorough review of the IRS business
and material actions taken thus far, a number
of growth and development opportunities have been
identified in the current market. Furthermore,
Mike Hammond (former CEO of JLT Risk Solutions)
has recently joined the group as deputy executive
chairman of International Risk Services, further
strengthening the management team led by Stewart
McCulloch.
To optimally position IRS to capitalise on market
opportunities, the group and senior management
team of the business are currently considering
the structural options to best support this growth.
These include the possibility of involving a new
private investor in IRS, alongside Alexander Forbes.
Discussions are being held with a few select investors
in this regard and in the event that this option
is pursued, it is likely that Alexander Forbes’
shareholding in IRS will reduce. |
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Income from operations |
Trading results |
March
2006
£m |
% |
March
2005
£m |
March
2006
£m |
% |
March
2005
£m |
|
129,6 |
(1) |
131,5
|
1,6 |
(81)
|
8,5 |
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EOS Risq is a partnership
of six leading European insurance
brokers, each of which operates in
its home country. In addition, the
partners own a Belgium-based company
called EOS Risq NV which owns a number
of companies in 11 other European
countries.
The six EOS Risq partners have operations
in 14 European countries: |
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Alexander
Forbes in UK and Ireland |
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Diot in France |
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Assiteca
in Italy |
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Ecclesia
in Germany and Switzerland |
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GrEco in
Austria; Czech Republic; Slovakia;
Slovenia; Hungary |
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Van Breda
in Belgium; Netherlands; Luxembourg
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The 11 operations
run through the jointly-owned EOS
Risq NV in Belgium are in Bulgaria,
CIS (Russia), Croatia, Kazakhstan,
Lithuania, Poland, Romania, Serbia,
Spain, Ukraine and Uzbekistan.
And to complete the European picture,
Alexander Forbes also owns Euroguard
(a cell captive insurer) in Gibraltar,
whilst Lane Clark & Peacock has
branches in UK, Switzerland and Belgium. |
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| Divisional Review |
| Corporate Risk Solutions |
Corporate Risk Solutions acts
as a retail broker dealing directly with corporate
industrial and commercial clients spread throughout
the United Kingdom and Ireland.
This business has been rejuvenated this year under
the leadership of Roger Brown and division has
produced credible results and is now well-positioned
in its market place. Initiatives put in place
to drive the new-business pipeline are beginning
to yield tangible results. During the year, a
new national sales director was recruited, as
well as a number of new business consultants.
We believe that this division now has the strong
foundation required to move forward and produce
solid results into the future. |
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| Professions |
The Professions division focuses
primarily on providing professional indemnity
insurance to a wide spectrum of professionals,
both in the United Kingdom and internationally,
and is the largest specialist player in this sector
in the UK market.
Following the resignation of a number of the senior
management team in October 2005, a new leadership
team led by James Houlder has been put in place,
including a number of key external recruits. The
new team has completed the implementation of new
products and technology to service smaller professional
firms and has significantly upgraded the service
offering to medium to large firms. Whilst results
declined this year primarily due to a softening
of rates and are likely to remain depressed next
year as the business position is strengthened,
the medium-term outlook for this business –
given its strong market position – is very
positive. |
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| International |
The International division
works with insurance intermediaries and their
clients on a world-wide basis assisting them to
find highly specialised insurance and reinsurance
solutions for their risks in the London, European
and international insurance and reinsurance markets.
The profitability of this division improved significantly
this year as a direct result of increased top-line
growth brought about by new teams and producers
in International Property and Financial Risks
in particular. The division continues to focus
on its sales pipeline and key recruits to generate
a strong growth in sales and associated improvement
in margins.
The senior management team was bolstered by the
recruitment of John Horsley as CEO. A strong and
enduring sales culture has been created within
the division. |
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| Specialisms |
The Specialisms division consists
of three highly niche, specialist business units:
Construction and Commercial Property, Reinsurance
and Political Risks.
These units are performing strongly with both
a strong core set of clients and a stream of one-off
project work that has yielded two larger deals
in the last two years. |
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| Asia Pacific |
This region has a growing top
line fuelled both by economies that are doing
well and a number of key hires brought on board
to boost the production capabilities across the
region.
The effect of China on the region, and our involvement
directly in China, are expanding and we are reviewing
options to accelerate this effect. |
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| Latin America |
During the year, strengthening
local exchange rates in Mexico and Brazil, domestic
reinsurance market restructuring in Brazil and
the loss of various key accounts in Mexico adversely
impacted on the Latin American region’s
trading results.
A number of key strategies have been put in place
to ensure that the business is well placed into
the future. |
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