REG - Close Bros Grp PLC - Update in relation to Premium Finance business

Close BrothersAnnouncement

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RNS Number : 2574Q  Close Brothers Group PLC  09 July 2025

 
 

 Update in relation to Close Brothers Premium Finance business
 9 July 2025

Close Brothers Group plc ("the group" or "Close Brothers") today issues an
update in relation to its Premium Finance business.

In line with the group's strategic priorities to simplify our portfolio,
improve operational efficiency and drive sustainable growth, we are focusing
the growth of our Premium Finance business towards commercial lines insurance
premium finance ("commercial lines"), where we see strongest risk-adjusted
returns and long-term growth potential. Whilst this means we will be reducing
our emphasis on personal lines insurance premium finance ("personal lines"),
we remain fully committed to supporting all aspects of our commercial brokers'
overall proposition, including their associated personal lines portfolio where
applicable.

With a proven track record and deep expertise, we see significant
opportunities to expand our presence in the commercial lines market. Our focus
will be on increasing our share of business with existing broker partners,
developing new broker relationships and applying our underwriting capability
to support higher-value cases.

While personal lines has played an important role in our Retail offering for
many decades, the market environment has changed. Rising costs to serve
customers, broker consolidation and increasing operational complexity have
impacted the long-term attractiveness of personal lines relative to other
parts of our portfolio.

Financial impact and outlook for the Premium Finance business

Focusing on commercial lines will enable us to invest in growth and strengthen
our position in the market, while streamlining operations and reducing
complexity.

To support this strategic repositioning, we will optimise the cost base across
the whole Premium Finance business through modernisation of our technology
platforms, digitising more of the onboarding journey and streamlining our
operating model. We estimate a steady state cost reduction of approximately
£20 million per annum by the 2030 financial year on an underlying basis
(excluding the impact of inflation and business growth), with c.£15 million
in estimated total costs to deliver the savings.

As a result of this decision, we will withdraw from certain broker
relationships over the next six to 12 months. These brokers predominantly
offer personal lines, without a material commercial lines focus, and represent
a modest portion (c.10%) of our broker network. The portion of the business
associated with these broker relationships contributed approximately 4% (H1
2025: £16 million; FY 2024: £34 million) of the group's operating income and
represented approximately 3% or £330 million of the group's loan book as of
31 January 2025 (31 July 2024: 4% or £365 million). We are committed to
maintaining full support for both customers and brokers throughout this
period.

We expect the Premium Finance loan book to decline by c.30% in the next three
years. Over the same period, operating profit in this business is expected to
reduce, reflecting both the lower loan balances and the investment required to
enhance the proposition and optimise the cost base. We expect this to be
offset gradually by targeted growth in commercial lines and cost savings from
a more efficient operating model. The net interest margin ("NIM") of the
Premium Finance business is expected to remain broadly stable, with a marginal
impact on the Banking division's overall NIM due to loan book mix effects.

Over time, we expect this business to operate with a smaller customer base,
but with higher income per case and a reduced cost base, leading to improved
profitability and returns.

A summary of key historical information on the Premium Finance business is
included in the appendix for reference.

Mike Morgan, Group Chief Executive, said:

"We are proactively shaping a more efficient and focused Premium Finance
business by repositioning it towards commercial lines. Over time, we expect
this business to operate with a smaller customer base, but with higher income
per case and a reduced cost base, leading to improved profitability and
returns. As outlined previously, my priorities remain to simplify the group,
improve operational efficiency, and drive sustainable growth. This decision
brings us closer to a more sharpened portfolio of core businesses positioned
to deliver attractive risk adjusted returns."

APPENDIX

Key historical information on the Premium Finance business

 ( )                              HY 2025

                                  As at 31 January 2025
 Number of brokers                1.2k
 (Customer) cases                 2.3m
 Loan book (total)                £958m
   Of which personal lines(1)     £441m
   Of which commercial lines(2)   £517m
 Average loan size (total)        £0.6k
 Typical loan maturity (total)    11 months

1 Personal lines predominantly provides finance for consumers' motor and home
insurance premiums. The average loan is c.£0.3k, with an average tenor of 11
months.

2 Commercial lines predominantly provides finance for SMEs' insurance
policies. The average loan is c.£2.4k, with an average tenor of 10 months.

Enquiries

Camila
Sugimura                                 Close
Brothers Group plc
020 3857 6577

Sam
Cartwright
H/Advisors
Maitland
07827 254561

 

About Close Brothers

Close Brothers is a leading UK merchant banking group providing lending,
deposit taking and securities trading. We employ approximately 3,000 people,
principally in the United Kingdom and Ireland. Close Brothers Group plc is
listed on the London Stock Exchange and is a constituent of the FTSE 250.

Cautionary Statement

Certain statements included or incorporated by reference within this
announcement may constitute "forward-looking statements" in respect of the
group's operations, performance, prospects and/or financial condition. All
statements other than statements of historical fact are, or may be deemed to
be, forward-looking statements. Forward-looking statements are sometimes, but
not always, identified by their use of a date in the future or such words as
"anticipates", "aims", "due", "could", "may", "will", "should", "expects",
"believes", "intends", "plans", "potential", "targets", "goal" or "estimates".
By their nature, forward-looking statements involve a number of risks,
uncertainties and assumptions and actual results or events may differ
materially from those expressed or implied by those statements. There are also
a number of factors that could cause actual future operations, performance,
financial conditions, results or developments to differ materially from the
plans, goals and expectations expressed or implied by these forward-looking
statements and forecasts. These factors include, but are not limited to, those
contained in the group's annual report (available at:
https://www.closebrothers.com/investor-relations
(https://www.closebrothers.com/investor-relations) ). Accordingly, no
assurance can be given that any particular expectation will be met and
reliance should not be placed on any forward-looking statement. Additionally,
forward-looking statements regarding past trends or activities should not be
taken as a representation that such trends or activities will continue in the
future.

Except as may be required by law or regulation, no responsibility or
obligation is accepted to update or revise any forward-looking statement
resulting from new information, future events or otherwise. Nothing in this
announcement should be construed as a profit forecast. Past performance cannot
be relied upon as a guide to future performance and persons needing advice
should consult an independent financial adviser.

This announcement does not constitute or form part of any offer or invitation
to sell, or any solicitation of any offer to subscribe for or purchase any
shares or other securities in the company or any of its group members, nor
shall it or any part of it or the fact of its distribution form the basis of,
or be relied on in connection with, any contract or commitment or investment
decisions relating thereto, nor does it constitute a recommendation regarding
the shares or other securities of the company or any of its group members.
Statements in this announcement reflect the knowledge and information
available at the time of its preparation. Liability arising from anything in
this announcement shall be governed by English law. Nothing in this
announcement shall exclude any liability under applicable laws that cannot be
excluded in accordance with such laws.

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