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

17th acquisition - see RNS

And up they go...

Great news - seems things are going according to plan:

Broker Network Holdings plc (AIM:BNH)



Acquisition of Adam & Gaskell Limited



Broker Network Holdings plc ("Broker Network" or "the Company") the network
organisation for independent community insurance brokers, is today pleased to
announce the completion of the acquisition of commercial insurance brokers Adam
& Gaskell Limited ("Adam & Gaskell").



Adam & Gaskell was formed in 1976 and is a highly respected commercial insurance
firm with offices in Lancaster, Garstang and Carnforth.



This is the eighteenth acquisition to be made by Broker Network, as part of the
Company's ongoing intention to purchase independent insurance brokers (both
Member firms and non-member firms) which are owned and headed by principles who
are looking to retire. Acquisition of these brokers offers Broker Network the
opportunity to increase earnings by placing business more effectively and by
retaining a higher percentage of premium turnover.



A condition of the deal is that the purchase price parameters will remain
confidential. However, the Company confirms that this latest acquisition is
broadly in line with the other acquisitions made to date.



All staff at Adam & Gaskell will be retained, along with the brand name, in line
with Broker Network's acquisition strategy.



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



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



"As our acquisition model continues to thrive, we are delighted to welcome Adam
& Gaskell to the Group and we are pleased to report that this, our eighteenth
acquisition, has been successfully completed. We continue in our drive to
acquire non-member firms such as this, in order to expand our network further
across the UK."

Great news imho:

BROKER NETWORK HOLDINGS PLC (AIM : BNH)


ACQUISITION OF THE GENERAL INSURANCE BUSINESS
OF TOWRY LAW GROUP


Broker Network Holdings plc ('Broker Network' or 'the Company'), the network of
independent community insurance brokers, is pleased to announce that it has
exchanged contract to acquire, subject to FSA approval, the general insurance
business of the Towry Law Group ('the Acquisition').

The Acquisition, which adds over 50m of gross written premium and six new
offices to the Company, is the largest made by Broker Network to date. The
Acquisition consideration is 12.5m cash, payable in full upon completion, which
will be funded by existing cash resources and bank debt. In the year ended 31
December 2005, the Acquisition recorded a pre-tax profit of 301,000 net of
payments to Towry Law Group, and had closing net assets of 3.47m. At the date
of completion, the net assets of the Acquisition will be 1.50m.

Upon completion, the Acquisition will be renamed and join Broker Network as a
full member. It will operate from offices in Birmingham, Bracknell, Glasgow,
Leeds, Leominster and the City of London. The enterprise will be majority owned
by Broker Network with the remainder owned by senior employees of the acquired
business. The business will trade as a separate subsidiary of Broker Network,
under the direction of current Managing Director, Martin Wright.

In addition, the Company reports that trading for its year ended 30 April 2006
has been strong and as a consequence expects to report sales and profit before
tax slightly ahead of market expectations.


Commenting on the Acquisition, Grant Ellis, Chief Executive Officer of Broker
Network, said:

'The acquisition of the general insurance business of Towry Law represents a
strong step forward in the development of the Broker Network business. We are
delighted to welcome such a well-regarded and high-achieving team to the Company
and expect to drive a significant improvement in the acquisition's
profitability. We will integrate it into our successful network infrastructure
and are confident it will be earnings enhancing for shareholders.

The purchase increases our gross written premium by some 12% to almost 400m,
further reinforcing the Company's strong position in the UK commercial insurance
market.'

And up they go again....