AUB Group has reported a 1.8% broking profit drop for its 1HY16 financial results in what the company has described as a ‘challenging market’ – but it said the hit would have been worse without its recent forays into New Zealand and risk services.
“Strong contributions have been made from the expansion in Risk Services and New Zealand, more than offsetting the impact of the reducing insurance premium rates in the insurance broking and underwriting agencies sectors,” the company said today.
Insurance broking in New Zealand contributed $0.6 million in the half to AUB Group profit (loss of $0.5 million in 1HY15, impacted by initial acquisition costs).
It benefitted from the merger of the two largest cluster groups in New Zealand to create the third largest broking entity by premium in the New Zealand market – Nzbrokers.
The Group also envisaged that its December acquisition of Runacres & Associates from
IAG via the 80% owned AUB Group NZ would contribute to second half earnings.
In Australia, average premium rates per policy reduced in the half (down 6% vs 10% pcp) and interest rates declined but brokers managed to maintain income by increasing client numbers (up 1% over pcp), increasing penetration of premium funding and expanding in life insurance.
Expense growth was also held to just 0.6%, despite brokers serving more clients, and growth was continued through bolt-on acquisitions.
The company highlighted Group results, which saw a 72% increase in reported consolidated NPAT for 1HY16 to $23.8 million (1HY15: $13.9 million), which benefited from the $6.2 million after tax profit on the sale of Strathearn Insurance Group, announced last December.
Adjusted NPAT, which reflected the underlying operating profit of the AUB Group, was $12.9 million in 1HY16, an increase of 3.5% from 1HY15’s $12.4 million.
The company described this as ‘pleasing in the context of a continued challenging insurance market.’
“This result demonstrates the strength of the AUB Group’s disciplined approach to its business model, operating model and strategy,” the company said.
The outlook regarding the commercial lines insurance market remained ‘challenging’.
“While we had expected premium rates to stabilise over the current financial year, the last six months have seen a continued deterioration in premium rates, albeit at lower single digit declines.
“In addition, competition in segments of Underwriting Agencies has impacted agency income in some portfolios.
“In Australia and New Zealand, premium growth is unlikely before late FY16 although the activities undertaken to offset the impact on commission income are forecast to continue.”
Expected growth in adjusted NPAT for FY16 was put at 0-5% over FY15.
“But this could be affected positively or negatively by future economic conditions and the premium rate environment.”
