Stakeholding - Insurer stakes can assist independence

The latest insurer-broker minority stake deal signifies the intent of some insurers to help keep brokers independent and to make them more likely to reject the overtures of the consolidators.

Commenting on the deal, a spokeswoman for Amlin said: "This is a logical step; we value TL Dallas' independence and want to support it in this way. We will jointly develop new product lines for its customers and expand our distribution. It is important that it remains independent. We are seeking to balance our portfolio, which is catastrophe-weighted, and this will help."

Colin Dallas, chairman at TL Dallas, said that it placed less than £4m of gross written premium with Amlin out of a total of £70m and that there are no agreements to underwrite more business with the insurer. The deal follows a similar 19.9% investment in Miles Smith and Amlin has said that there is more in the pipeline. If Amlin had bought 20% then it would then have gone from being an investor to becoming an associate that would have to make a full, separate disclosure about the company's revenue and profits on the group's profit and loss account.

TL Dallas has a portfolio of general insurance, risk management, financial services and credit insurance. The company is a member of Unitas and has kept a low media profile compared to fellow members Alec Finch and Perkins Slade. Colin Dallas said that he had been approached many times before April's changes to capital gains tax but described his firm as "fiercely independent".

Dallas said: "We look forward to jointly developing new business lines and are confident that this closer relationship will prove beneficial to our UK retail client base." Paul Chainey, chief executive at wholesale and retail broker Miles Smith, also mentioned SME property, signalling Amlin's intent to expand in this area. Also in August, Amlin acquired the renewal rights to approximately £20m of commercial motor fleet insurance from HCC Underwriting Agency.

Dallas, who has a 24% stake in TL Dallas Group - with Butterworth holding a similar stake - said: "We can't put more business with Amlin unless it offers better terms for the customer. We were talking to them before the deal about several schemes and these discussions will continue. We have been fiercely independent and will continue to be so."

There is an all-employee share ownership plan at the firm, with over half of all staff at its broker TL Dallas & Co. benefiting.

There is now a significant number of brokers with insurer partners as minority shareholders. Allianz has a 10% stake in Oval and a 5% stake in Jelf, while Norwich Union has a similar investment and has bought a £5.7m stake in Group Direct. Another rumoured example is that an insurer backed the management team at Camberford Law. PB has also learned that there have been a number of broker stake deals that have not been disclosed.

A market expert said that some of the larger insurance companies are taking minority stakes in some "surprisingly small" entities so the insurers feel that they will continue to be able to have a close relationship with them. The strategy is in sharp contrast to the majority stakeholdings taken by the likes of Axa and Groupama and suggests that some insurers may be trying to pre-empt approaches from consolidators by taking some money 'off the table' for the existing owners and hence allow them to keep their independence more easily.

Amlin's stakes

TL Dallas Group includes TL Dallas & Co. and a number of subsidiaries in which it owns majority stakes, including TL Dallas Independent Financial Services, TL Dallas (Special Risks), TL Dallas (City) and Dallas Hall Rhodes. The firm was founded in 1919 and, between 1973 and 1989, was part of Marsh. It has offices in Belfast, Bradford, Falkirk, London, Surrey, Manchester and Shetland.

According to Companies House, TL Dallas had a turnover of £9.4m with a pre-tax profit of just over £2m for the year ending December 31 2007.

City-based Miles Smith has been trading since 1925 and is involved in many specialist and high-risk industries. It is a wholesale and retail broker that controls over £100m of premium in the industries of construction, environmental waste and asbestos, property, motor fleet and leisure and entertainment.

Before the deal, Miles Smith was owned wholly by its staff and directors.