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Highlights:

  • CBG to reduce personal lines premium finance exposure, citing cost and market pressures
  • Close Brothers expects c.30% decline in Premium Finance loan book over three years
  • CBG shares fell 7.68% to GBX 379.60 on 9 July 2025 following strategy update

Close Brothers Group plc (LSE:CBG) has announced a strategic shift within its Premium Finance division, signalling a move away from personal lines in favour of commercial lines insurance premium finance. The decision, part of a broader effort to streamline operations and improve returns, comes amid changing market conditions and increasing service costs in the personal lines segment.

The company stated that while personal lines have historically played an important role in its Retail offering, the current market environment characterised by rising customer service costs, broker consolidation, and operational complexity has reduced the segment’s long-term attractiveness. As a result, Close Brothers will gradually withdraw from broker relationships that focus primarily on personal lines and lack a substantial commercial offering.

These broker relationships account for roughly 10% of the group’s network, contributing approximately 4% to group operating income in FY24 and representing 3%–4% of the group's loan book as of the January and July 2025 reporting periods.

Close Brothers expects the Premium Finance loan book to decline by approximately 30% over the next three years. This reduction reflects the planned exit from certain broker relationships and a strategic emphasis on higher-value commercial cases. Although this will initially reduce operating profit, the group anticipates gradual offsetting through cost savings and targeted growth in commercial lines.

As of the latest figures, the portion of the Premium Finance business set for withdrawal contributed around GBP 16 million in operating income in H1FY25 and GBP34 million in FY24. The loan book attached to these broker channels totalled approximately GBP 330 million at 31 January 2025 and GBP 365 million at 31 July 2024.

The group forecasts minimal change in net interest margin (NIM) within the Premium Finance business, though a slight downward effect is anticipated on the overall Banking division’s NIM due to portfolio mix changes.

In conjunction with its strategic pivot, Close Brothers aims to modernise its technology platforms, digitise more of the onboarding journey, and simplify its operating model across the Premium Finance business. These changes are projected to deliver an annual cost reduction of around GBP 20 million by FY30, excluding inflation and growth impacts. The total estimated cost of implementation is around GBP 15 million.

Although these changes will lead to a smaller customer base, the group expects higher income per case and a leaner cost base, which it believes will contribute to improved profitability and efficiency over time.

Group CEO Mike Morgan commented that the move is aligned with Close Brothers’ broader priorities to simplify the business, enhance operational efficiency, and focus on areas delivering better risk-adjusted returns. He noted that while the Premium Finance business will operate at a smaller scale, it is expected to deliver more sustainable financial outcomes through higher-quality commercial exposure.

Investors responded negatively to the update, with Close Brothers shares falling 7.68% to GBX 379.60 on 9 July 2025.