Austbrokers has forecast profit growth of 5-10% for this financial year, after posting a 16% drop in statutory profit to $34.7 million for the year to June 30.

CEO Mark Searles blames soft market conditions, falling premium rates, accounting adjustments and the loss of big accounts in WA due to client failure in that state’s economic downturn.

However, he says strong gains in underwriting revenue led to a rise in underlying net profit.

On an adjusted basis, net profit after tax increased 10.5% to $35.5 million, due to the policy of income diversification across the broker group’s three business units: underwriting, broking and insurance and risk.

“I’m extremely pleased with the result,” Mr Searles told insuranceNEWS.com.au. “It’s the company’s ninth successive year of double-digit underlying profit growth.

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

Broker revenue was up 11% to $303.3 million and broker profits gained 4.2%.

The insurance broking network comprises 48 brokerages, representing 320,000 clients and more than $2 billion in gross written premium (GWP).

Group revenue increased 18.3% to $199 million on organic growth and strategic acquisitions across the three divisions.

Underwriting agency division Austagencies increased profits by 33% and revenue by 40% to $13.3 million – a result Mr Searles says is “very pleasing”.

He says Austagencies, which contributed 5.3% to group growth, is now Australia’s largest non-insurer underwriting group, with GWP of more than $280 million.

About 40% of Austbrokers’ new underwriting business has come from start-ups, which is “significant growth”, according to Mr Searles.

“We’re happy to invest in new underwriting start-ups because that’s proven to be very successful for us in the past year or so.”

The group has added bolt-on acquisitions and, where possible, sought gaps in the market to build businesses.

“If we can find the right underwriter to employ, then we build a business. We’ve been doing that for the past three years; we’ve just been doing it quietly.”

The market views success as acquiring companies, but “we take a different view, especially in the underwriting agency space”, Mr Searles says.

The insurance and risk division, formed this year after the acquisition of risk services groups Procare and Risk Strategies, contributed 1.3% of the group’s profit growth.