High-street moves - Swinton kingpin buys again

Patrick Smith, chief executive of Swinton, has once again bucked the trend of personal lines insurance brokers by investing significantly in the high street with the purchase of Equity Insurance Brokers in a deal worth £50m.

EIB will add 91 branches to the business, giving Swinton a total of 580. Zurich's decision to close Endsleigh's branches last year means that Swinton now has a dominant position in the high street, including a return to Northern Ireland after securing Open and Direct with the EIB purchase.

Showing his faith in face-to-face retail outlets, Smith also decided to open five branches from scratch in 2008 that have broken even collectively after only six months. The only other significant player writing similar personal lines insurance is A-Plan, which was bought by Barclays Private Equity in a £150m in April last year.

The broker, owned by French insurer MMA, had already acquired Colonnade in 2002 and Budget Retail in 2006 and acquires approximately 50 small high-street brokers annually.

Smith will look to change Equity's branch names to Swinton by the end of the year, although he will keep the Open and Direct name for branches in Northern Ireland. He said that, if two branches were located very close to each other, one would be named Colonnade and the other Swinton.

Driving force

EIB grew predominantly under the auspices of director Mike Hutton, who carried out a large number of small acquisitions and helped to buy Open and Direct, which has 17 branches, from private equity house Alchemy Partners.

The majority of Equity's 600 staff should be safe, although Hutton hinted at an opportunity to "rationalise the management" but remarked that it was too early to comment because the firm is in a three-month consultation programme.

Swinton now handles more than 3.25 million car and home policies, employing over 4,500 people. In an interview with PB (October 2006, pp.20-22), Smith said that, at "three million (policies), you are then a big boy". He added: "Most people don't visit a branch; the value of a branch comes from the knowledge it is there. It brings comfort."

Swinton has negotiated a £175m funding facility with LloydsTSB Corporate Markets that will be used in part to fund outstanding lending to customers so that they have a consistent deal, whether or not they insurers. Last year saw increased pressure on margins and Smith confirmed that profits increased last year, although he added: "It has been the toughest year we've had."

Not perturbed by the economic climate, Smith is looking for more deals in both personal and commercial lines and is set to open another half dozen branches from scratch. Never in broking has so much faith in the high street been placed by so few.

Background to Swinton's acquisition

December 2006: Equity Insurance Group bought by Insurance Australia Group for £700m

January 2007: Equity acquires Open and Direct for an undisclosed sum from private equity house Alchemy Partners. It has branches in Belfast, Coleraine, Dungiven, Londonderry, Magherafelt and Newtonards

July 2008: IAG decides to split up its UK operations after difficulties both here and in Australia

October 2008: IAG confirms bids over the sale of some of its UK businesses

December 2008: Swinton buys Equity. Hastings is sold by IAG to private investors, rumoured to include Towergate's Peter Cullum.