Bright future

Sitting in the head offices of Brightside Group, home to 550 employees, it is incredible to think that the starting point was the formation, with just four employees, of Commercial Vehicle Direct in April 2001. Within a year the headcount for Group Direct, as it was then called, had risen to 40. Ever since, the company has powered on to success after success announcing sales of over 56,000 commercial vehicle policies in the first half of 2009. It has diversified into areas such as medical reporting, and premium finance but insurance broking is still responsible for two thirds of its revenue.

With a current market value of £91m and profits before tax of £3.2m in the first six months of the year, it is quite a broking success story. Martyn Holman, chairman of broking at Brightside Group, explains the idea that led to the creation of the company. "Commercial vehicle insurance wasn't automated, you needed rating guides - it was a nuisance product," he says. "The concept was by using Mysis [now Open GI], you could sell it as per personal lines and via a call centre. We were effectively the first people that did it and stole a march on the market."

Holman continues in a relaxed manner: "In 2003 we took over the AA's book of [van insurance] business and dropped it straight in CVD. That really was what helped boost the numbers quite significantly."

Holman had joined from Marsh in 2002 to set up the commercial division, ONE Business, in Southampton. With engaging confidence, he explains that with tradesmen coming to the company for their van insurance, it soon found its clients had needs for liability insurance, goods in transit cover and often shop covers. The extra division allowed it to meet these needs and cross-sell beyond the initial core offering and to branch out into fleet insurance.

For commercial fleet, Holman cites Highway and LV as being insurers they work closely with and names AIG for commercial package and Groupama for liability.

"We have always been big on service delivery in terms of connectivity with an insurer," he says. "We primarily only want to deal with EDI. In the commercial space we like web-based offerings that fit in with our system."

The acquisition of Torquay-based broker Bryce Owen Davies in 2004 allowed for the range of cross-selling to develop further via the Motor and Home Direct Insurance Services in the personal lines space which has built steadily and sold nearly 19,000 policies in the first six months of this year.

In June last year, in a financial move designed to speed access to the Alternative Investment Market, Group Direct performed a reverse takeover of Brightside and secured investment from Aviva which now holds 9.1% of the company and Stena Investments which holds nearly 8%.

"Strategically it [the listing] has added more pressure," Holman admits. "In terms of day to day there is no difference. You are still doing your job and you have still got numbers to hit."

The company has been protected in the recession by, as Holman defines it, playing "in the S of SME". He adds: "There are not many big construction jobs at the moment, they are laying people off. The guy who works for them is an electrician. If he is not working on the site what is he going to do? He is probably going to go on his own for a while. If he has got a van, he needs to insure it and that's where we've been protected."

Looking forwards a continuing focus on cross-selling is the key driver for the business. In June this year, the company moved all its technology onto the Open GI platform as the previous use of three systems had become a hindrance. Holman reflects, "We used to think that we were very good at cross-selling but we could never really tell." He explains that a crude postcode match two years ago in the commercial sector showed of 80,000 CVD customers only 5,000 had been cross-sold a commercial product: "It is a good news, bad news situation. You look at it and think 'we are nowhere near as good as we thought we were, that's rubbish'. But then you think 'but actually that is quite encouraging because we've still got all of that we can do'."

Longer term

The intention for 2010 is to achieve double-digit growth organically with a like for like increase in the profit figure, irrespective of any strategic acquisition. Back in 2004 came the formation of Southern Rock Insurance Company in Gibraltar. The insurer underwrites the eBike, eCar and eVan businesses marketed under the eGroup banner of brands. Bringing them into the group will allow further cross-selling opportunities. He says: "What I can definitively say is that is where we are going to be spending first." The company has already brought eVan as a client book out of the insurer and put it into the plc and now intends to do exactly the same with eCar and eBike. Holman continues: "The next stage is to turn those products from Southern Rock being the sole provider into limited panels. Effectively the e-products will be Brightside's online trading arms and the broking businesses will be the more traditional routes to market."

With frank but friendly precision, he delivers his belief that these routes need to incorporate online sales matched with the opportunity to speak with a person should queries arise. Brightside's strategy is reliant on quality control.

He says: "What we have done on eCar since Easter is to check every licence and every proof of bonus, which has had a stunning effect. Around 20% of what goes on comes straight off either because a licence is not submitted or, when it is, it is not remotely linked to what it said it was then. Likewise with the bonus proof. And then from a further 20% [of policies] we get an additional premium because there has been an element of non-disclosure but at a lower level."

Often more online sales equals less staff but Brightside's approach means growing the company's headcount. Holman explains: "It drives the cost of the model up. You need staff and the big negative is you need people for an online model, however that is more than covered by the additional premiums. The flipside is that the 20% you cancel improves the underwriting result."

Buying

Perhaps surprisingly, given its model, Brightside has been linked with local rival Jelf. "A lot of it comes from the fact they are local and we are local and everybody knows each other," says Holman. "The bottom line is that the core part of what Jelf does is not what we do and has never been what we wanted to do."

After a thoughtful pause, he is happy to stress that if a deal was on offer that involved £50m of debt for the potential of £100m of upside then the company would proceed. However, Holman is keener to stress the management, which is currently undertaking a fundraising process, is adverse to the idea of going into debt.

He says: "It has never been our preferred option and to be perfectly honest still isn't. The thought of becoming bigger but picking up £50m of debt is not that appealing to us frankly. A venture capital route has never been something that we wished to consider and I don't think ever would be. If we were going to go that route it would be about getting the money ourselves that we could then control."

Watch this space. Having grown so quickly and with a clear leadership vision, there is still plenty of upside for this innovative broker.

Brightside Group

Director Martyn Holman, chairman of broking

Established 2001

Number of staff 550

Lines of business commercial motor, liability, goods in transit, commercial, personal lines

Locations Bristol, London, Manchester, Southampton, Torquay

GWP £85m