Towergate Insurance has sold advice arm Towergate Financial, comprising of a financial planning arm and mortgage broker John Charcoal, to Palatine Private Equity for £8.6m.
As part of the agreement, Towergate will retain responsibility for any “historic regulatory liabilities”, including consumer redress arising out of past business reviews into enhanced transfer values and unregulated collective investment schemes.
Last month’s preliminary financial results for 2014 revealed that independent file reviews for both investigations are ongoing and it is in continued talks with the Financial Conduct Authority, with up to £85m set aside for potential redress costs for past recommendations.
In a statement today (6 March), the firm stated that Towergate Financial had been long identified as a non-core business, given its different operational and risk profile.
“Given the ongoing investigation in relation to past advice provided by the Towergate Financial business on [ETVs and Ucis] it was determined that the group should seek to de-risk itself from any future potential issues that might arise in this sector.”
Towergate went on to explain that under the terms of the agreement, all risk on all business written following completion of the sale will be removed.
As reported at the end of November, the insurance company parent received approaches from parties interested in potentially acquiring the group, which has been on the block since 2013, and appointed Evercore and Rothschild as joint advisers to weigh up the proposals.
As part of the transaction, a claims handling agreement has been drawn up providing Towergate with oversight over all claims which may arise for historic liabilities, as well as access to the employees and information held by the advice businesses to help deal with claims.
In addition, a joint liaison group has been established, whose primary function will be to facilitate the smooth and timely operation of the skilled person review being carried out by accountant BDO in respect of ETVs and Ucis.
The sale could have been completed early in the fourth quarter, however it was put on hold due to restructuring at Towergate. Subject to receipt of all necessary consents the company expects the transaction to complete on or before 20 March.
Scott Egan, interim chief executive of Towergate said that the sale is further evidence of a commitment to the core strategic focus to build on our capabilities in SME insurance and specialist personal lines.
“The provision of independent financial and mortgage advice sits outside these markets and has now found a more fitting home with Palatine Private Equity.”
Towergate Health+, which currently reports into Towergate Financial Group, will be retained by Towergate Insurance following the transaction.
Palatine will acquire the entire equity of TF Financial Planning and TF John Charcol, with the net proceeds after adjusting for minority interests and transaction related costs - adviser fees and transition costs - coming to £6.4m.
peter.walker@ft.com
