Premium funder Centrepoint Alliance has initiated a major restructure to avoid going into run-off after Wesfarmers Insurance dropped its preferred funding agreement with the company.

The company has shed a third of its staff and now has about 40 remaining. It has until September 30 to convince its financial backer, National Australia Bank (NAB), it can broaden its funding base to reduce strategic funding risk.

“If this outcome is not achieved, then NAB will require Centrepoint Alliance to enter into a full run-off of its receivables book,” Centrepoint revealed in a statement to the Australian Securities Exchange (ASX).

Wesfarmers Insurance has opted to set up its own premium funding facility to clients of its wholly owned brokerage OAMPS, ending its preferred premium funding agreement with Centrepoint from August 31. It has also sold its financial interest in Centrepoint Alliance.

Termination of the agreement will reduce Centrepoint’s funding requirements by about one-third.

The restructure is expected to result in a financial year loss of $2-3 million, while the lost agreement is forecast to result in a $17 million writedown of goodwill.

Trade in Centrepoint Alliance securities resumed last week after the company instigated a voluntary suspension from April 30 until July 1 while it worked through its funding issues.

MD Richard Cawsey has departed the business and will be replaced on July 13 by former OAMPS CEO Tony Robinson – a renowned turnaround manager.

The company’s directors have expressed confidence in the profitability of the premium funding business and say they have instigated negotiations with alternative funding providers.

Premium Funding CEO Bob Dodd told insuranceNEWS.com.au the process is “challenging for the Centrepoint Alliance team and our loyal customer base”.

He says the company is working “to retain and regain the support of our core customers. The feedback received since the suspension was lifted earlier this week is favourable.

“We continue to have the ability to write and settle business and I look forward to a brighter period of trading in servicing our core insurance broker and authorised representative base to the best of our ability,” he said.