Heading for the stars

Bob Screen, previously marketing and business director at Hill House Hammond, got together with The Primary Group in 2003 to launch commercial broking consolidator Vega Insurance Services.

Screen says he hit it off with Primary straight away as the privately owned global insurance distribution business, based in Bermuda, was looking to set up a commercial intermediary business but without looking to control the business.

He says: "The group is happy to let me get on with it and we have the funding to grow to in excess of £100m premium income this year. You only have to point to Primary's balance sheet to see the strength of the group. The funding for Vega acquisitions comes off the balance sheet so there is not a lot of investor pressure."

Vega has so far made four acquisitions - Abacans, The Thompson Rudd Group, Parkwood Sinclair Insurance Brokers and Jobson James & Associates. Screen says all of the acquisitions are commercial brokerages that are respected in their local area and have potential to expand. The brokerages continue to operate under their own brand and with their existing employees.

He continues: "We look for businesses that continue to demonstrate the potential to grow. This comes from key people within the business. We want them to continue, unlike some consolidators that acquire businesses where the principals are looking to retire."

Investment is made available to organically grow the individual broking businesses, and Screen meets with the brokers on a monthly basis to discuss market opportunities and performance. Vega has provided capital to employ new people at Abacans, and Parkwood is due to move to larger offices to facilitate growth.

Screen spends a lot of time talking to brokers that are interested in the Vega proposition, however, finding the right kind of business can be a lengthy process with deals taking an average of six months. He says: "It is important that Vega acquisitions have a similar culture - a focus on customers and a realisation that people are key to running the business. It is also important for managers to have an entrepreneurial spirit - to be keen to get involved rather than simply being a manager in a larger business."

Screen expects to announce its next acquisition this spring. While he expects merger and acquisition activity to step up post-regulation, he disagrees with those that believe authorised brokers will see the value of their business increase.

Screen argues: "I disagree that prices will go up. Prices are likely to fall as brokers count the cost of regulation and commercial rates continue to soften, hitting brokers' profits, which are used to value a business."

Now that Vega has reached a critical mass, it is looking at ways to improve the efficiencies of its businesses and boost profits. It is currently looking at implementing new application service provider software so brokers operate on a common IT platform. It is also looking to assist with compliance issues across the group.

Each brokerage is independently authorised. As a holding company, Vega does not have to be directly authorised, however, Screen is registered as an approved person and sits on the board of Vega's brokerages.

Screen believes that becoming authorised by the Financial Services Authority is the easy part for general insurance brokerages and proving compliance in the long term will be more challenging. However, he is confident that, with the backing of Primary, investment in organic growth and a good line-up of acquisitions, Vega is in a strong position to become a force to be reckoned with in UK commercial broking.

VEGA INSURANCE SERVICES

Managing director: Bob Screen

Established: 2003

Number of offices: Four operations offices, one central office

Locations: Preston, Brentwood, Birmingham and Bristol (central office)

Number of employees: 110

Lines of business: 90% commercial, 10% personal lines

Gross premium income: £40m.