AUB hails diversification strategy as profit rises

AUB Group has reported net income of $42 million for the year to June 30, up 20.4% on the previous year.

MD and CEO Mark Searles says he is delighted with the performance in the face of “twin headwinds” – falling premiums and declining investment returns. “The thing that pleases me is how our strategy is really coming to fruition,” he told insuranceNEWS.com.au. “Four years ago Australian broking was 88% of our business, but the group has diversified.

“Australian broking now accounts for 70%, underwriting 15%, risk services 11% and New Zealand broking 4%. “It’s a really good balance and the concept of providing total risk solutions to our clients is really starting to gain traction.”

Australian broking’s contribution to group profit was down 2.1%. “Premium rates were down 5% last year, and brokers can’t control that,” Mr Searles said. “But if you look at the things they were able to control, they were all very positive. “Policy count was up and brokers grew other areas of income such as premium funding and life insurance. We are forecasting a flat environment for the coming year, but even in those conditions the business can continue to grow.”

New Zealand broking’s contribution soared by 883%. Having entered the market 18 months ago, performance has beaten expectations and AUB says it is now the largest broking management group in New Zealand.

Sura underwriting agencies’ contribution to group profit dropped 22%. Average premiums were down 9%, exacerbated by strong competition in strata and plant and equipment, but policy count was up 7%. “Sura’s growth over the past three or four years has been stellar, and the top line can’t keep going gangbusters all the time,” Mr Searles said. “We’ve had a year of tight management, but I’m pretty pleased where the business is right now.”

Risk services’ profit contribution was up 260%, “demonstrating the benefits of the group’s strategy to provide total risk management solutions to clients”. “Going back a few years there were a few doubters out there,” Mr Searles said. “It is fee-based business, not coming off the back of commission, so is not affected by the insurance cycle.”

Mr Searles told insuranceNEWS.com.au Australia and New Zealand rather than Asia are the focus for AUB because it is “focused on markets we truly understand”. Some partners have relationships in Asia, and we support them in that. “But our core focus is driving our strategy forward in Australia and New Zealand. There is plenty of opportunity for growth.”

http://insurancenews.com.au/corporate/aub-hails-diversification-strategy-as-profit-rises