Amidst a sluggish premium environment, an ASX-listed broker network has set out to reduce its reliance on its traditional insurance broking business by planning to invest more in the injury and rehabilitation-management sector.
AUB Group, formerly known as
Austbrokers, has expanded over the past four years to include associated sectors such as risk services, plus an NZ broking acquisition. But chief executive
Mark Searles said it's the Sydney-based group's “risk solutions partnership” business that will serve as the “cornerstone for future growth.”
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"The group strategy has changed in the last five years,” Searles told
The Australian Financial Review. “When I initially joined it was Austbroker Holdings and we were buying more Australian brokers and building that business. But when I looked at it, there was also always a bit of a risk that something could happen to that market. When we talk about our strategy now, we want to be the leading provider of risk management and advice. When we talk about risk, there are three areas – physical risk, people risk, and financial risk.”
The AUB Group boss said one of the biggest risks faced by the employees of its SME clients is being injured at work.
"We started buying these allied health businesses because they are attached to the whole risk-assessment solution for our clients," he told the publication. "In an old-fashioned way, physical risk was very much what an insurance broker has been doing for many years. You go in and deal with the client and look at the physical risks like the building, the financials, and come up with a solution if something happened with those things."
As part of its strategy to increase its focus on “people” risk, the $822 million company has acquired stakes in three allied health businesses – now owning 50% of Procare Group, 60% of Allied Health Group, and 60% of Altius Group.
Searles said the company had focused on NSW, but would now set its sight to other parts of the country.
In 2016, AUB Group's equity partner Altius bought WA-based PeopleSense, an injury-management and psychological services business, and is seeking opportunities in Queensland and the ACT.
As with other companies in the insurance sector, the AUB Group continues to suffer from flat insurance premiums. While the company does not set the premium rates for its brokers, it is still greatly impacted by the downturn in the insurance cycle.
While its Australian broking division posted a 3.6% rise in profit to $49.2 million for the full year to June 30, it was still hit by a market that saw increasing premiums that only started in the last quarter.
"There was evidence of single-digit percentage premium rate increases in Australia the last quarter of full year 2017 and an expectation that insurers will continue to execute premium rate increases at a similar level into full year 2018," AUB said. "Any sustained increases in the premium rate environment in Australia and New Zealand in full year 2018 are dependent on actions by insurers and indications are that insurers will be executing premium rate increase strategies that will have a positive effect on income."
Last month, Searles said AUB's 2017 growth was "not the result of premium increases.” For the full year to June 30, AUB's risk-services division saw a 5% increase in its pre-tax profit contribution to $7.5 million,
AFR reported.
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