The entry of Burford Capital – the world’s largest third-party funder – into the UK litigation financing market has helped double its annual income.
The AIM-listed company’s results for 2012 show a rise in dividends from $25m (£16m) to $54.2m and pre-tax profits are up from £15.9m to $34.1m.
That is despite the acquisition and reorganisation of after-the-event insurer Firstassist in February 2012 – which gave Burford an onsite presence in the UK market.
Speaking to Litigation Futures, CEO Christopher Bogart said the annual results showed that the market for third-party funding was “rapidly developing”.
Other strong figures for 2012 included Burford generating $18m net of invested capital – which represents a 61% return – with a further $19m in net investment recoveries pending. During the year, Burford continued to invest in cases, putting $72m in nine new commitments.
Mr Bogart said the results validated the success of the company’s investment strategy and “broad, diverse portfolio”.
He said: “Burford has emerged from its reorganisation and its recent move into the UK market as a more flexible and diversified business, which will enable us to better capitalise on the growing demand for our unique service offering.”
Mr Bogart said the UK strategy “had gone very well”, with $16m of income and $11.5m of profits generated in just the first 10 months.
He said: “We think there are interesting opportunities in the UK that we are uniquely positioned to serve.
“We are the only player in the UK to provide an integrated package of litigation insurance and litigation finance – that is a compelling offer for law firms and their clients as they navigate the post-Jackson legal landscape.”
Mr Bogart said this means Burford can offer faster working with more sensible economics.
Since its inception in 2009, Burford Capital has generated gross investment recoveries totalling $93m, with a net figure of $35m of invested capital – a 61% net return. In total, it has committed $373m to financing litigation. As of 31 December 2012, Burford had $289m of capital in 30 investments.
Mr Bogart added that Burford’s continued goal is to develop with the market and introduce new products.
He said of the concept of litigation funding taking off in the UK: “It’s time has come. There is the combination of the ever-increasing cost of litigation and the frustration with corporate clients at the lack of alternatives following the financial crisis.”
The annual results said the impact of the Jackson reforms had seen a rush from lawyers and clients to start cases – generating a “significant volume” of new insurance business.
It said: “This ‘last chance’ insurance business has added further to the significant and likely profitable tail that will run through the UK business for several years, although it has to some extent slowed our deployment rate of litigation funding, as we have been literally swept off our feet with the demand for high-margin insurance products.”
Last week, third-party funder Argentum said it was taking “bold decisions” to finance unprecedented litigation such as the RBS shareholders claim, in order to move out of the shadow cast by funding giants such as Burford.