The general insurance market continues to be a tricky place to operate, but Australia’s listed insurers and broker cluster groups appear to be rising to the challenge.

Last week brought half-year results from AUB Group and Steadfast, plus a full-year result from QBE.

There are differences in approach, and differences of opinion, but the view from analysts is consistently positive.

AUB, formerly Austbrokers Holdings, reported a 72% increase in net profit to $23.8 million. This included the sale of Strathearn, but adjusted net profit was still up 3.5% to $12.9 million.

Despite a drop in broking profit, this is particularly pleasing for CEO and MD Mark Searles, offering hard evidence that his diversification strategy is working.

Long-term sustainable growth through that strategy, as opposed to driving growth via acquisitions, remains the focus.

“The strategy is key to me,” Mr Searles told insuranceNEWS.com.au. “We’ll make acquisitions if they fit with the strategy, but we are not going to use acquisitions as the core driver of growth.

“Some others have gone out and made multiple acquisitions. That’s great, but it’s a short-term impact.”

Cue Steadfast.

Its results were impressive, with underlying net profit growing 74% to $26.6 million.

The impact of acquisitions is clear, but the organic performance was solid too.

CEO Robert Kelly says last year’s purchases are performing beyond expectations, and there is an appetite for more. “Our strong pipeline of acquisition opportunities in the general intermediary market in Australia continues unabated and we remain disciplined in our due diligence process,” he says.

Morningstar insurance analyst David Ellis says Steadfast’s result is “pretty rosy”.

“It has reconfirmed its position that its model is strong enough to withstand economic downturns,” he says.

“The insurance cycle is improving from a negative position, which will particularly help the likes of Steadfast as it generates revenue based on the dollar value of the insurance contract.”

However, he warns constantly acquiring businesses “can end in tears”.

“QBE is the perfect example of how it can come back to bite you,” he says. “It had years of acquisition-fuelled growth, and in the end it got too big, too unwieldy and out of control.

“I would like to see more focus on organic growth. Having said that, I have no problem with Steadfast acquiring smaller broker groups here and there.”

As for QBE, Mr Ellis says it delivered what it promised, and the turnaround story is well on track.

QBE’s full-year net profit fell more than 7.4%. Earlier this month Suncorp and IAG announced half-year drops in net profit of 16% and 19.5% respectively.

“[For QBE], it has been long and tortuous, and there is still a lot of work to do in the US, but Europe was strong, Australia was pretty strong,” Mr Ellis says.

“We won’t see a strong recovery in group profits until the US operation improves.”

Commonwealth Bank analyst Ross Curran agrees the QBE result is “pretty solid” across most regions.

“Over the past couple of years it has de-risked the business and taken it back to basics,” he told insuranceNEWS.com.au.

“It is not based on acquisitions and there is a stable platform to grow off in future.”

The state of the market, and whether we have reached the bottom, is a matter not everybody agrees on.

Mr Searles says it is improving but we are still in negative territory, while Mr Kelly insists the market is now flat.

IAG raised a few eyebrows the previous week by announcing it has successfully pushed through some price increases in commercial insurance.

JP Morgan Senior Insurance Analyst Siddharth Parameswaran told insuranceNEWS.com.au Steadfast has been the most optimistic.

“Austbrokers and QBE have been a little more sanguine,” he says.

“Personally, I think we are getting close to the bottom, but we are not there yet, and to me the comments from IAG were a little surprising.”

Whoever is right, analysts believe the listed insurers are well set for when the market turns.

“QBE, IAG and Suncorp are all going along OK in terms of their underlying insurance businesses,” Mr Ellis says. “All suffered sharp falls in investment income and are hoping that pricing would have turned positive by now.

“But with strong market shares and a loyal customer base, they are well placed.”