Soft market hits Austbrokers but diversification afoot

The challenges of the soft insurance market have been exemplified by Austbrokers recent profit downgrade but industry leaders are confident brokers will be able to ride out hefty drops in premium rates.

Last month, Austbrokers stock dropped almost a fifth after the company warned shareholders that its profits for the last half of 2014 would be up to 18% lower than predicted, due mainly to falling premium rates.

Austbrokers Company Secretary Stephen Rouvray says some rates have dropped by 30%, with an average of an 11% drop across lines.

However, the network still expects to post a profit this financial year, thanks largely to its brokers increasing clients numbers and policies written.

The sharemarket concern prompted Steadfast to post a notice that the broker network was on track to post a net profit up 9% on last year.

Meanwhile, Austbrokers has made one of its largest acquisitions to date, purchasing a 60% stake in Altius Group, a workplace rehabilitation specialist.

When completed, the transaction will be worth $24 million and Austbrokers CEO and Managing Director Mark Searles says it is a significant step in their diversification strategy and will enhance their risk services capabilities.

Last year, Austbrokers purchased a half-share in the Procare Group, another workplace injury specialist.