Consolidation is a term dominating the local insurance industry right now, and broking network Austbrokers is the latest to jump on the bandwagon.

Austbrokers has announced it’s taking a 50% interest in cluster group Insurance Advisernet Australia. The move is an important one; Insurance Advisernet is the country’s seventh largest broker and a rival to Austbrokers.

Insurance Advisernet has gross written premium of about $150 million and 90 authorised representatives in more than 60 locations throughout Australia. It has annual revenue of $26 million and 300 staff servicing about 29,000 clients.

The deal, which is subject to several conditions, is scheduled to take effect from the start of next month.

Insurance Advisernet directors and shareholders Ian Carr, Don McLardy and Fred Allsopp will retain a stake in the group and continue to work for it. Mr Carr, the founder of the business, will stay on as MD for at least five years.

He says the group has experienced enormous growth since its humble beginnings 10 years ago. Joining Austbrokers will allow continued independence while improving the value proposition for clients.

Mr Carr told Sunrise Exchange News yesterday Insurance Advisernet’s network of authorised representatives have responded well to the news. “They are all self-employed, and not much changes for them other than they now have more buying power and security.”

He says the group has been considering such a move for about six months.

“The whole industry is changing when it comes to M&A activity, and we wanted to ensure we are giving the best proposition to our representatives. We aim to continue our significant growth by tapping into the increased buying power, efficiencies and expanded product range available through Austbrokers.”

Mr Carr expects industry consolidation to continue for some time.

The final price for the deal will be determined by reference to Insurance Advisernet’s 2008 full-year earnings, with an initial payment of $4.3 million to be paid on completion (representing about 70% of the expected purchase price based on Insurance Advisernet’s results for this year).

Austbrokers CEO Lach McKeough says the acquisition will increase premiums placed with his company to more than $860 million.

“We are also delighted to see that Mr Carr has agreed to reinvest some of his sale proceeds through his investment in Austbrokers, further aligning the interests of Austbrokers to IAA.”

Austbrokers has also acquired 50% of Ferdi Nel Insurance Brokers in North Sydney. The business, which has income of more than $400,000, specialises in trade credit insurance and will operate as Austbrokers Trade Credit.