JLT’s chief executive has shrugged off fears about the impact of the UK’s Brexit vote on his insurance brokerage business.
Dominic Burke, who was one of the few financial industry executives to publicly support leaving the EU ahead of the UK referendum, said JLT was well placed to cope.
“Europe is still a small, single-digit part of our revenues,” he said on Tuesday, adding that “we’ve learned to trade across the world … we can deal with regulations, tariffs and restrictions.”
Many parts of London’s insurance industry currently use passporting rights to access EU markets, and there have been fears that the loss of these rights would push business away from the UK.
Like others, JLT makes use of EU passporting. But it also has locally domiciled operations in other parts of the EU, including Ireland, Sweden, the Netherlands and France, which it could use instead.
“It is an issue, but it is an issue we’re on top of,” explained Mark Drummond Brady, JLT’s deputy chief executive. “We have no anxieties about our ability to cope. We’ll invest in skills and people as it becomes a requirement.”
Both executives were speaking as JLT reported results for the first half of 2016. Although the fall in the value of sterling after the referendum provided a boost, underlying pre-tax profits fell by 7 per cent to £89m.
That was partly due to investment in the US, where JLT has been growing its business in recent years. Revenues from the US more than doubled in the first half to £16m as the company attracted 200 new clients, but losses also increased.
“Our arrival in the US has given us a bigger, longer, broader runway of growth for our international business,” said Mr Burke. On Tuesday, the group announced an increase in overall spending plans for the US business, from $80m by 2017 to $100m by 2018.
Overall group performance in the half year was also held back by JLT’s UK employee benefits business, which advises corporate pension schemes. Profits there slipped from £7.1m to £0.2m, with Mr Burke blaming government pension reforms for cutting demand for JLT’s services. A cost-cutting plan to save £14m a year is under way, with headcount already reduced by 300 people.
JLT reported £34m of exceptional items in the period, most of which came from settling litigation with rival Willis over the hiring of a fine arts and jewellery team.
Earnings per share for the period more than halved to 15.1p, but JLT still increased its dividend by 5 per cent to 11.6p.
Barrie Cornes, analyst at Panmure, said that the company had delivered a “solid” set of results, with underlying profits ahead of expectations.
Source: Financial Times