There were some common themes in the profit announcements from Steadfast and Austbrokers last week.

Both gave outlooks suggesting a flat market lies ahead, and both say the diversity of their earnings will deliver when pricing is weak.

The two dominant broker groups remain on the lookout for more brokerages to acquire or sign up, while working to build integrated businesses that can smooth out the peaks and troughs of the insurance cycle.

Their acquisition binge means the pair must focus on pulling together teams and businesses to gain efficiencies associated with scale. Their revenue is rising, but so are their expenses.

If acquisitions are the tip of the iceberg, the back office is what lies beneath, unseen and potentially treacherous if it fails to deliver for the parent companies or brokers.

Austbrokers predicts a stable to soft premium environment in commercial lines this financial year. Moderate economic growth is forecast, but a patchy outlook may have an impact on SME owners.

MD and CEO Mark Searles says a flat market can provide opportunities.

“That’s where a relationship and the quality of your value proposition come to the fore, which is exactly what we have been investing in and working on,” he told last week’s results briefing.

“Our overall strategy is of income diversification. I don’t want to be wholly reliant on an insurance cycle to get a result.”

Steadfast MD and CEO Robert Kelly says his group has been through soft markets before.

“We understand cycles,” he said. “I don’t think in this midsection of the market, where we dominate, that you will see blood on the floor.”

Mr Kelly notes that insurers warned of softening conditions when they reported results last month.

“We are not seeing a collapse in the SME sector,” he said. “We are seeing competitiveness coming in and out and some opportunistic pricing in the area.”

Cover is now more readily available – including for risks that were hard to place 18 months ago – and there is even competition for clients whose buildings have expanded polystyrene panelling.

“That creates opportunities for brokers,” Mr Kelly said. “An increase in competition doesn’t necessarily mean you drop revenue.”

Mr Searles says insurers dropped rates at renewal to gain market share, but “I am kind of hoping that the crazy activity we saw [in the June quarter] has flattened out now”.

The two chief executives are focused on integrating acquisitions to reduce costs and make their broker networks more efficient.

Mr Searles says Austbrokers’ entry into insurance and risk through a 50% stake in risk management consultancy Risk Strategies reduces Austbrokers’ exposure to the insurance cycle by generating fee-based business from clients and broker and distribution partners.

“The key driver here is to provide risk services to either distribution partners or to end clients, so we have a comprehensive and complementary offering out there.”

The investment in Risk Strategies last month follows a similar move earlier this year with Procare Group, which provides workers’ compensation and insurance support services.

The tie-ups give brokers more chances to cross-sell, Mr Searles says. For example, a broker selling workers’ compensation insurance has the opportunity to sell rehabilitation services or investigation.

Profit from Austbrokers’ underwriting agencies grew 33% last financial year, and Mr Searles says the company is happy to invest in new underwriting start-ups “because that has proven to be very successful for us in the past year or so”.

Underwriting agencies are also flavour of the month at Steadfast.

Unveiling a takeover move for Calliden, with the aim of acquiring its eight underwriting agencies, Mr Kelly says such businesses are fixed-margin, meaning Steadfast can make money from them without risking capital.

He says the deal will bring Steadfast, Munich Re and the Munich subsidiary Great Lakes Australia closer, with Steadfast brokers gaining greater access to products backed by Munich Re.

The acquisition of 50% of the local operation of reinsurance broker Beach & Associates – now known as Steadfast Re – last month has already led to the reinsurance broker negotiating a better deal for Steadfast members.

“We’ve already had some opportunities out of the group where we have been able to elongate what the broker is doing,” Mr Kelly said.

Steadfast has established hubs in six states, uniting similar brokers to get scale and cost savings.

Mr Kelly told insuranceNEWS.com.au it has been a drawn-out procedure.

“There will be some expense reduction in the [current] financial year but the full impact of the hubs will start to reach fruition in FY16.”

Steadfast’s Project360 plan, to make the process of collecting premiums and distributing them to insurers more efficient, is at an early stage.

Austbrokers and Steadfast have reported profit rises following acquisitions and efficiency gains but the year ahead may challenge them more due to outside factors, such as a weaker economy.

The story over the past year has been about takeovers. In the coming few years, it’s likely to be about how the broker groups have integrated and benefitted from that expansion, and how they have implemented back-office efficiencies and growth opportunities to justify the acquisitions.