Source www.trendwatch.co.uk 1 September 2004

January 14 2005 is a date that will soon be engraved on the hearts of anyone managing or owning any insurance company, large or small. On that day, almost all general insurance companies, including insurance brokers, will be regulated by the FSA.

Trendwatch publications is, of course, also regulated by the FSA. As a media business, compliance with the massive FSA rule book is considerably less onerous than it is for business that hold client money for investment or insurance purposes. Even so, grappling with the FSA can be like mud wrestling a multi-headed hydra.

To give one small examplee, we recently found out that, to add letters Ltd after ourname )no other changes to the business whatsoever) requires the completion of between 50 and 60 pages of forms and the preparation of much other supporting documentation. The FSA will not even deign to look at it unless it is accompanied by a cheque for 1,500. If everything then seems to be in order, the FSA undertakes to deal with the matter within 6 months.

If, in our infinte naivete, we had failed to realise this palava was a legal requirement, the MOther of All Parliaments has decreed that we would be committing a criminal offence, and liable to be detained at Her Majesty's pleasure at a house of correction and her learned judge's choosing.

This is what the FSA regards as'light touch' regulation which minimises disruption and cost ot businesses.

Now imagine how tricky things can get if you attempt something really complicated such as taking on a member of staff.

The FSA estimates that it already has about 10,000 in the mortgage and general insurance field by the short and curlies. It estimates that at least another 10,000 business will be dragged kicking and screaming into the brave new world of 'light touch' regulation. Around 2,500 insurance brokers will be lightly touched by the FSA on January 14.

But, as everything in life, one mans Kafkaesque nightmare is another man's business opportunity. Which brings us to Broker Network Holdings (BNH)

BNH floated on AIM as recently as May this year (raising 2m in the process), so most investors will know little about it, if indeed they've heard of it atall. We're recommending it because we feel that burgeoning profitability will soon make it a lot better known.

As the name suggests, BNH exists to build a network of independent insurance brokers, all operating within the BNH framework. This follows a path wellbeaten by IFA's, accountants and dentists. BNH is the longest established player in its field and believes that it has a stronghead-start, and a great deal more credibility than other 'me too' imitators.

The system works like this: as an independent insurance broker, you undertake to pay 95 a month to BNH. You also undertake to pass all your insurance business premiums through BNH. BNH places the insurance business with the giants such as AXA, Norwich Union, Royal and Sun Alliance and Cornhill. The members receive enhanced commission from the insurance companies because of the preferential status granted to BNH. Since BNH deals with the placing of the insurance, this greatly reduces the credit risk of the individual members.

BNH takes 1.5% of the premiums from its members and, in return, provides members with a number of valuable support services, including access to Lloyds of London, centralised back-office IT support, marketing assistance, access to e-commerce, staff training and development, business management and monitoring... and FSA compleance support.

BNH is also prepared to purchase broking firms outright where the opportunity presents itself. There are believed to be a large number of small owner-managed brokers where the owner is approaching retirement. For many of them selling theri business to BNH, typically for around 0.3m, rather than grappling with the FSA, is probably an attractive option. So far BNH has acquired 9 such brokers.

Since it was founded in 1994, it has absorbed 133 brokers into its network and plans to acquire about 90 more over the next 5 years. Out of the estimated 19bn paid in insurance premiums in the UK every year, an est 80% is handled by insurance brokers. Most of this goes to through the big brokers, but about 3bn a year (typically commercial rather than personal business) is processed by the 2,500 small so-called 'community brokers' that form the BNH network.

hat represents the extent of BNH's market pond.

At time of floatation, BNH est that no more than 12% of its target broker had aligned itself with any particular network. Clearly there's plenty of scope for growth.

The company is already profitable. Its last full year results were published in July and showed a profit for the principle trading subsidiary - the PLC holding company had not yet been created - of a record 0.77m up rom 0.70m. 27 new members were taken on.

Brewin Dolphin reckons it will make 1.77m this year, rocketing to nearly 3m in 2005-06. If these estimates are correct, it puts BNH on a forward p/e of 6, which is extremely low for the sector, especiallyfor a company whose profits are growing at such a rapid rate

BUY

The value of my investment in BNH has gone down since I bought the shares recently. What is happening here?
I don't wish to be a wet blanket..it is in my own interest that the price should go upwards!

Did you get my email john??
buyers still around...

Hello Legend good to see you back on the board ,i thought you had deserted us.
Even though we have had a small rise today i am little surprised at the poor performance of SP given results and acquisitions made.
I have total confidence in the long term prospects of BNH but it is a little disappointing when you could have sold for a small profit and got back in again .
DB66

Hi, glad to see your still holding doughboy... i am off to the agm tomorrow. Will let you know what is said (if anything)

Plenty of buying interest....

Spoke to Grant Ellis for about half an hour. I HAVE NEVER BEEN AS OPTIMISTIC AS I AM NOW.

He is a very down to earth person and openly admits that running a plc is new to him, but i have absolutely no doubt of his ability to run the company. He is a very smart cookie and knows exactly what he is doing. When a person can look you in the eye and tell you that he isn't/won't be losing sleep about the company he is running, you feel much more at ease about the company you have invested your money in.

The Fraser Tennant acquisition is well worth its money... the broker network name is now well known in scotland and has generated plenty of interest from scottish brokers to contact bnh leading to potentially more members.

I spoke to buchanan initially about the 'sale of shares' and its impact onthe depressed share price. They were keen to introduce me to grant ellis to tell him what people thought. He was on holiday at the time of the announcement and when he came back he thought that it looked quite bad so it was him that initiated the rns to reassure shareholders.

The buyers over the past few days have been institutional. I would predict that this would continue ;-)

I would predict more newsflow over the next few months!!!

if i had more money i would add, I don't so I will hold the ones i have got!!

P.S. Upbeat trading statement

Keep Smiling

Thanks for the information legend,given the statements made today and your conversation with Grant Ellis i think we can all sleep well with this one.
The only way is up (i hope)
db66

Totally agree, don't think i have ever seen such thing as a dead cert in all my life (short as it is)

Legend,

If you wish you can e-mail me on PM. Thanks.

Ramu,

I have sent it... let me know when you get it...

Legend,

Received e-mail and replied.

BROKER NETWORK HOLDINGS PLC

(AIM: BNH)

ACQUISITION OF WHITEHOUSE WOODALL REEVES INSURANCE BROKERS



Broker Network Holdings plc ('Broker Network' or 'the Company'), the network of
independent community insurance brokers, is today pleased to announce the
goodwill and asset purchase of Whitehouse Woodall Reeves general insurance
brokers, of Birmingham.



Whitehouse Woodall Reeves, which has been a member firm of Broker Network for 5
years, will be the fifteenth acquisition made by the Company since the beginning
of 2004. The acquisition is in line with the company's acquisition strategy to
purchase the businesses of Members whose principals are looking to exit or to
retire.



Following the acquisition, Whitehouse Woodall Reeves will continue to operate
from their existing premises and under the same name and brand. All staff will
also remain, with Ian Whitehouse taking on a consultancy role for the coming two
years.



The purchase of the business has been completed following approval by the
Financial Services Authority of the change of control of the business.



Commenting on the acquisition, Broker Network Chief Executive, Grant Ellis,
said:



'The purchase of Whitehouse Woodall Reeves marks yet another successful
acquisition of a member firm, once again proving the strength and viability of
our growth strategy. We continue to purchase both member and non-member firms
across the UK and look forward to further expansion throughout the country.'

Blimey o riley, i think this is institutional investors picking up stock.

a large seller - i think it can only be capricorn at 84p and several institutional fund managers buying stock... at 85p. Market makers make a penny on putting the transaction through.

Either way, we will find out within 3 days.

All imho of course

I did have a bit of a panic yesterday when i saw the large volume of sells but at least we soon found out they found good homes.
The acquisition news released on 1st Sept had no impact on the SP for some reason.I hope they are not expanding to fast,15 acquisitions since the beginning of 2004 is going some and probably more to come before the end of the year?
DB66

Doughboy, look what i have noticed:

I noticed this from results:

Operational highlights



Successful placing on AIM, raising 2.2m net of expenses
11 acquisitions completed as at year end
Number of network Members increased to 139
Progress in line with expectations at time of AIM listing
Good conditions for future growth

Notice number of members 139...

Look at the announcement today... particularly the quote of member numbers since capricorn took over...

Capricorn became a holder in Broker Network in April 1997. Since that time, the
Company has expanded from 20 members to over 150 and has recently reported
record turnover and profits.

It proves member numbers are still on the up since fsa took over. Surely this will boost profit.

Thought someone would have picked up on the increased members... oh well.

Hopefully tomorrow will tell us who are the new holders of bnh. It would be good to see the board topping up... this will support the sp imho.

Any thoughts??

Not a holder, but have followed your comments for some time and had a look today. No price given for the share placing - unlikely to above current price. BNH looks fine on the face of it, but sp performance in 2005 suggests otherwise. Probably me being thick, but still not sure exactly what income streams they have, and the terms of trade for them getting paid. Last figures showed annual turnover 7.5m, but trade debtors over 10m (presumably linked to gross commissions receivable 40m, but still seems a lot). With all the acquisitions, there may also be some operational difficulties in aggregating management information across the group. Could just be that after initial euphoria (placed at 71p in May 2004) a degree of realism has set in and with Capricorn now out of the way they may head north again. I will continue to watch.

I think price paid will be 85p... a discount for institutions sub current sp.

Comments much appreciated.

25k sold and SP drops 5p. Where are the institutional investors?

Hello, good announcement the other day i felt.

Apparently 6 institutions bought the stock. All the holders that own over 3 percent have now notified the market which surprised me quite a bit.

Hope this helps.

Apparently according to another poster on another bb, they report end november. So hopefully a trading statement in the closed period i.e. beginning november.

The company recently said company growth was in line with expectation.

I'm sure this will touch 1.50 but not sure when or even this year! Good company, good results but very illiquid. If this stock is difficult to buy, then many potential investors will be put off and place their funds elsewhere - I think this is the main reason the SP has not really moved since the latest positive RNS.

Good luck to all investors.