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  1. 1. Insurance broking pulse check January 2016 key findings What’s the state of play in insurance broking today? Which firms are outperforming — and why? And how does your business compare? To answer these and other key questions, Macquarie Business Banking recently conducted a short pulse check survey of insurance broking firms around the country. A unique snapshot of a changing industry in a challenging market, our pulse check builds on the insights from our benchmarking studies in 2011 and 2013 — and paves the way for our next in-depth benchmarking survey in 2016. The market Revenues rise despite the challenges Our latest pulse check confirms that the insurance broking market remains highly competitive, with softer premiums putting revenues under pressure. Yet the research also shows that most firms have remained resilient, with the majority well positioned to capitalise on better conditions over the next 12 months. Revenue. 69% of firms achieved revenue growth in FY2015, down from 83% in FY2013. On the flipside, 18% saw revenues fall, more than twice the proportion reported in our 2013 survey. 9%8% 33% 36% 6%7% 1% 6% 9% 25% 43% 9% 6% 2% 7%7% 21% 34% 13% 16% 2% Increased 30% or more Increased 20-29% Increased 10-19% Increased 1-9% No changeDecreased 1-9% Decreased 10-19% Decreased 20-29% 2011 2013 2015 Revenue growth 2011 2013 2015 Increased 86% 83% 69% No change 6% 9% 13% Decreased 8% 8% 18%
  2. 2. 2 Insurance broking pulse check Janurary 2016 key findings Profit. 75% of firms posted EBITDA margins of 10% or more in FY2015, an impressive result in a tough operating environment. Encouragingly, only 6% reported margins under 1%, suggesting that most firms remain profitable and well positioned to ride out difficult market conditions. Mergers and acquisitions. Industry consolidation is continuing, indicating that many firms see scale as a key driver in achieving further growth and business efficiency. Outlook. The vast majority of respondents expect conditions to improve next year, with 86% forecasting a profit increase, four points higher than in 2013. New client growth is expected to be overwhelmingly the most important profit driver, while only one in five forecast hardening premiums to positively impact profit. Profit margins Willing buyers have eased, while sellers have increased Most expect profits to rise between 1% and 19% 2011 2013 2015 3% 14% 32% 23% 19% 9% 6% 10% 20% 30% 19% 15% 6% 19% 20% 23% 21% 11% <1% 1-9% 10-19% 20-29% 30-39% ≥40% 28% 24% 31% 7% 6% 10% 14% 22% 16% 51% 48% 43% Overall 2011 Overall 2013 Overall 2015 None of theseA willing seller A willing buyer or sellerA willing buyer Increase 30% or more Increase 20-29% Increase 10-19% Increase 1-9% No changeDecrease 1-9% 2011 2013 2015 7% 10% 29% 38% 9% 3% 3% 8% 28% 43% 13% 2% 6% 9% 31% 40% 10% 3% Decrease 10-19% 1% 1% 2011 2013 2015 Increase 84% 82% 86% No change 9% 13% 10% Decrease 4% 3% 4% 2011 2013 2015 <10% 17% 16% 25% 10-29% 55% 50% 43% ≥30% 28% 34% 32%
  3. 3. 3 Insurance broking pulse check Janurary 2016 key findings The outperformers What were the two key characteristics of high performing firms in 2015? Despite tightening conditions, around one in three firms achieved profit margins of 30% or more in FY 2015 — roughly the same proportion as in our 2011 and 2013 surveys. While these firms are clearly doing many things well, our pulse check points to a few key factors that set them apart. In particular, they are more likely to focus on business efficiency and staff development measures to boost performance — enabling them to deliver a higher quality service at a competitive price point, while keeping margins strong. Searching for efficiencies. Asked which factors they expect to positively impact profit growth, high performing firms were more likely to emphasise improved efficiency, while low profit firms were more likely to rely on client growth. High performers also said they would benefit from improved economic conditions, suggesting many are well positioned to capitalise on opportunities created by a future upturn in activity across the economy. Finding and keeping talented people. Our pulse check confirms that high performing firms work harder than their peers to attract, retain and develop talent. Among other incentives, they are more likely to offer training and development, flexible working arrangements, career opportunities, and out-of-cycle salary rises. High performing firms use a wider range of strategies to find and keep talented staff What are the factors you expect will positively impact profit? 65% 50% 35% 25% 28% 18% 8% 5% 67% 64% 54% 46% 26% 17% 6% 7% 71% 79% 56% 50% 19% 31% 6% Non-salary benefits (i.e. flexible working) Training and development Offering bonuses Career progression Discounted premiums Out of cycle salary reviews None of the above Other Low (<10% of revenue) Med (10-29% of revenue) High (≥30% of revenue) 63% improved efficiency 29% improved economic conditions 25% Low <10% of revenue 43% Medium 10-29% of revenue 32% High ≥30% of revenue Defining outperformance: 32% of businesses achieved margins of 30% or more
  4. 4. Insurance broking pulse check Janurary 2016 key findings For a closer look at how your business is performing against key industry benchmarks, please contact your Macquarie Relationship Manager or call 1300 812 673. The information in this summary has been prepared by Macquarie Bank Limited ABN 46 008 583 542 AFSL & Australian Credit Licence 237502 (‘Macquarie’) for general information purposes only and is based on statistics and information collected by Macquarie from the 2015 Macquarie Business Banking Insurance Broking Pulse Check Survey (‘the Survey’). This information does not constitute advice. Before acting on this information, you must consider its appropriateness having regard to your own objectives, financial situation and needs. You should obtain financial, legal and taxation advice before making any decision regarding this information. Macquarie does not warrant the accuracy of any information collected in the Survey. Forward looking forecasts are estimates only and are based on the Survey results. Macquarie does not warrant the accuracy of these estimates and actual results may vary based on a number of market, regulatory, financial and environmental factors. Additionally, past performance is not a reliable indicator of future performance. © Copyright is reserved throughout. The information contained in this document must not be copied, either in whole or in part, or distributed to any other person without the express permission of Macquarie. Small 0–9 staff 66% increased revenues in FY15 28% had margins of 30% or more 57% forecast 10%+ profit growth 57% offer staff development Medium 10–19 staff 72% increased revenues in FY15 36% had margins of 30% or more 36% forecast 10%+ profit growth 70% offer staff development Large 20–29 staff 72% increased revenues in FY15 40% had margins of 30% or more 24% forecast 10%+ profit growth 84% offer staff development Discover how we can keep your business in front Snapshot by business size How does your firm compare? While our pulse check shows that businesses of every size can be highly profitable, it is also clear that business strategies and performance will be affected by the size of your firm and the resources at hand. Here is a snapshot of some of the key differences between large, medium and small firms in today’s market.