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Exclusive: Insurer Prepares For PPI Sale

(c) Sky News 2012

A major provider of mortgage payment and income protection insurance is being prepared for a sale that could net its owner a windfall worth hundreds of millions of pounds.

I have learned that Towergate, the insurance broker founded by City tycoon Peter Cullum, is considering a sale of Paymentshield, the division selling policies through intermediaries which cover borrowers’ mortgage payments if they become unable to make them.

The group, which has become Britain’s largest managing general agent, or MGA, has asked a group of investment banks to present ideas for the future of Paymentshield, which could include a sale or expanding it within Towergate.

MPPI has not been caught up in the broader mis-selling scandal which has engulfed Britain’s major banks, costing the big four high street lenders alone more than £11bn so far.

Paymentshield, which also sells income protection insurance as well as straightforward buildings and contents insurance, has enjoyed a strong performance in recent years.

Figures from Towergate's full-year results in 2011 showed a 6% increase in operating profit to £47.8m. At the half-year stage in 2012, operating profit was up 15% to £24.9m.

A spokeswoman for Towergate said it was “proud” that Paymentshield had not been guilty of mis-selling insurance, and insisted that a sale of the business was not certain.

"Towergate does not comment on market speculation. Paymentshield is a high performing business within the Towergate Group. We are very pleased with the growth we have seen in that business over the last five years and the significant opportunity it presents for future growth," she said.

It is unclear exactly how much Paymentshield would be worth although analysts said it was likely to be several hundred million pounds.

Towergate is run by Mark Hodges, a former Aviva (LSE: AV.L - news) executive, with Mr Cullum serving as non-executive deputy chairman.

It bought Paymentshield in 2006, since when the group has sold a stake to Advent International, the private equity group.