Personal Group investing for growth

New Chief Executive Officer Mark Scanlon has been given a decent platform for growth at employee retention scheme specialist Personal Group, with profits hitting record levels in 2011.

Results for 2011 were "in line or a little above" market expectations, Scanlon told Sharecast.

Revenue rose to £27.5m from £27.0m the year before, a tad below market forecasts, but underlying profit before tax trumped broker estimates of £9.70m at £10.0m, a new record for the company, and up 6.8% on 2010's £9.4m.

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Scanlon has been brought in with a brief to take the company's evolution to the next level as founder and former Chairman Christopher Johnston increasingly takes a back seat.

Appointed in November of last year, Scanlon has been sizing up the company and sees "quite a bit of opportunity in our current market," which is predominantly blue-collar workers, though he quipped that the company has its eyes on the "pale blue-to-white-collar market" as well. "Since Christmas we have been putting some energy into that."

As a result, the company is investing in sales and marketing to grow the top line.

"In the forthcoming period we will build our management team with our initial focus on continuing to grow sales. This will inevitably have an effect on our cost structure in the short term but is clearly designed to improve earnings in the medium and long term," Scanlon said.

How material the slow-down in profits growth is would be down to "how quickly we write new business," Scanlon said.

The company is also tooling up its sales reps with the latest electronic gizmos - iPads and the like - to make it easier for electronic sign-ups. Unlike many competitors in the employee benefits and insurance game, Personal Group does not rely entirely on mail shots and e-mail communication as it seeks new customers; its reps go round to the factories and offices of their clients at least once a year for a spot of face-time.

Being able to whip out an iPad and sign a customer up to a new service - whether it be child vouchers or income protection insurance - is not only a lot more convenient, quick and efficient than a laborious bout of form-filling, but it impresses the heck out of the customers as well.

"Customers really like it," Scanlon informed Sharecast. "It is really important to us that every customer is registered on our web site. Customer engagement is the key element to our employee retention offering."

On the subject of income protection plans, where the company will pay a proportion of a person's wages while they are laid-up in hospital or incapacitated at home, Scanlon admitted that the group is looking for a new description of this particularl offering, which has been tainted by its association with mis-selling of policies by the High Street banks.

"We did not do any mis-selling, but unfortunately you get tarred with the same brush," Scanlon said.

The group balance sheet remains strong, with no material debt. Its Personal Assurance (PA) division's balance sheet had available qualifying assets as at 31st December 2011 of £10.2m. These provide a margin of solvency which allows PA to write further significant increases in premium income without the requirement for new capital. The board expects this to remain the case when the new insurance regulatory framework Solvency II is introduced; Personal Group may present itself as an employee benefits firm to its customers, but underneath the bonnet it is an insurance firm.

Last year its gross premiums written rose to £20.6m from £18.5m. Earned premiums net of reinsurance rose to £19.1m.

The group has already announced a dividend of 4.45p in respect of the first quarter of 2012, and if things go as expected, the group expects that pay-out to be repeated in the second, third and fourth quarters of this year. That would make the full-year dividend 17.80p, slightly ahead of market projections of 17.40p.

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