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

Hats off to you Legend. A true winner. What's on your radar at the moment?

BVM a dead cert - from my broker. PDX at a gamble and TOA all look good. TOA and BVM a safer bet than PDX. Not got so many in them (PDX), but have done well so far.

Write up in the Insurance Times 2nd December....

'Broker Network chief executive Grant Ellis said the "signs are good for the future" as the company reported its first results since floatation on the AIM in May this year. The network reported pre-tax profits of 709,000 for the six months ended 31 October 2004, up 68% on the same period in 2003. Membership numbers have risen to 138 members from 133 last year. The network has acquired nine members so far in 2004. Keith Insch, formerly of Hill House Hammond has been appointed managing director of the network-owned brokers.'

OMG Blimey o riley. Thanks for post Balli

i am still not happy ath the continual movement to purchase insurance brokers....there is no worthwhile profit in that area,

management should continue what they are good at...which is being a broker network.

i exspected that a much greater number of brokers would be joining this respected and fair dealing network.

it will be increasingly difficult for so many brokers to:
gain good trading terms from insurers....and good credit periods
place certain risks
meet new business volume terms of insurers
demonstrate to the FSA there facility to search a wider market
deal with the horrendous FSA in the brokers own right

any prudent broker should commence a two year plan to construct his business and accounts ready for a sale in the market place......and see the benefit in better health which on its own will be worth a million pounds

Yes point taken, but you have to admit that the figures do look good.

Wills and Co brokers believe this will be 1.80-2.00 within 1 week someone said on another BB. Some others reckon 4 by 2006... not so sure myself!!!

Did you buy any at 77p when you were commenting on here MPW777?

What are anyone elses thoughts? I welcome any response on here, the price has almost doubled in a month!!!! Surely some happy punters about!!!

hello legend i tanks to you for this recomentation,i enter at 77 now doubble
fantastic,i wish i would put more money that time , but better not to be to gredy sometime,,,,,,,,what you think this company share will reach soon??
tank you again legend very much appreciate for your comment
anymore recomendation?

no i did not buy any at 77p......neither did i buy any Burtonwood Brewery three years ago............or Glenmorangie 15 months ago

i found my peace about two years ago when i moaned about not having bought a particular share . my son asked me to go through my papers and i listed 40 shares that i had firmly thought about buying. some back every horse in the race just so a winning ticket can be produced.

there is a good man at the top of broker network .....and i would like to see him stick to what he is good at ....that is running a broker network

remember a share like broker network does not need much in the way of buyers for the price to go up...and of course the market maker can be doing skilful manoevres with a price in such a small market

if you do not have the last annual report i suggest you obtain it and carefully check as to how many obtions there are as options can severely erode your share value in a small company also find out at what stage broker network take credit for commissions received or receivable....and are they providing fully for the expenses relevent to income received in advance of truly earning it

So what you looking at MPW777 at the moment??

legend 290782 and your posting no. 37

my favourite over the last three years has been PZ CUSSINS. i put my shirt on it and now i have a free tailor for life. if you look at a graph you will see the rise in price but other companies have risen over that period as well. however i feel that PZCOUSINS is sounly based.

the major [very] problem with PZ is that they are not only committed to a final salary pension scheme but sadly they are even very enthusiastic about having a final salary pension scheme for their staff and workers.

contrast that with the fact that in todays news it is revealed that even the government realises it cannot afford to operate a final salary scheme. an average scheme yes .

PZ COUSINS has thus unwittingly terned a major portion of its operations into being a pension company...a most peculiar pension company because directly and indirectly PZ COUSINS really pays all the contribution costs.

even if the scheme ceased to-day liabilities could still be running in 70 years
time.

however i am sure you will not regret a purchase but do not sell as something good will happen to the company one day

Tipped in Shares Mag for 2005... up they go. Anyone else in this stock??

Come on lets hear ya!!

LONDON (AFX) - Broker Network Holdings, one of The Shares Magazine's Tips for 2005, moved up 7 pence to 133-1/2, while a 'buy' recommendation in the Investors Chronicle lifted Media Square 1 pence to 19-3/4.

I,m in these-only a small holding but glad to see the tipsters are waking up to the potential multibagger! this is a company all the IFAs really need to help them survive it seems to me and so can't fail to grow like Topsy. fingers crossed etc.

An excellent day... It seems a time ago when I bought in at 61p the day my broker went to see the company!!!!

I shall post the shares magazine article in due course.

ANOTHER NICE TICK UP TODAY. PEOPLE ARE STARTING TO LOOK AT THIS NOW. MORE TO COME ME THINKS.

MPW777

I found this on ADVFN... I wasn't sure of the terms of Broker Network buying the brokers, but one of the posters put this. What do you think??? :

Farmers Son - 5 Jan'05 - 15:12 - 129 of 130

I like the way they're buying all these small-fish brokers at an average of 1.15 times their earnings!
When was a listed company ever valued at 1.15 times earnings? Thats's basically a return of 87% per year, just because the small fish won't be able to afford the cost of regulated operations, and prefer to be bought out...

Personally I am in agreement with you that it should concentrate on being a network but the above post seems logical!!!

P.S. Haven't had time to look at PZ Cussons... been so busy with work at the mo. On the face of it.. looks like a stable co.

Legend

Legend,

BNH has dropped consistently the past few days. Do you of any reasons and are you still in? Thanks.

Ramu

Ramu, I am still in, not concerned one bit. In fact, all shareholders yesterday should have received a bullish uptodate newsletter. I know you probably want a quick return, but now as of 14 Jan, BNH will start making real money. This will be realised in July's finals. I think sp will then be 2-2.50. Much more to come. This baby has just started

I think mms playing games is the top and bottom of today... Daily movements like this don't concern me. MM's are businesses and will try and make as much as they can. If people are willing to sell in a falling market then they will gladly buy the shares they sold at 1.30-1.40 back from the punter at 1.17 like they did this morning!!!!

SP picking up now.

BNH plenty of cash - 3m and big growth prospects, tipped at 1.265 in shares mag. Wouldn't have thought you could go wrong at this price!!!

Regards

Legend

Legend,

Good to see you still hold yours! Been in and out a few times since you recommended them at 85p... (thanks) If i was a sensible investor i would have bought and stayed put. Looking to get back in funds permitting next week, will wait and see what happens to asc first though.

Happy investing!

Legend,

Thanks for the reply - you just confirmed what I suspected. Anyway, I bought another 5,000 at 1.20 this morning and thanks to you, I am very happy with BNH.

Off topic, are you still in BVM, DA., TND, TOA, POL and what are your price targets? Thanks again.

Regards,

Ramu