Interview: Mark Searles, AUB Group

Since packing up his life in London and flying half way across the world to Australia, Mark Searles, CEO of AUB Group, has transformed a broker into the leading equity-based broking, risk management, advice and solutions provider in Australasia.

Searles joined AUB in 2013, then Austbroker Holdings.

His 25 years’ experience in senior executive roles, in marketing and IT across the banking and insurance sectors led to him being offered a job ‘down under’ as chief commercial officer at CGU, a division of Australian insurance giant IAG.

“I’d never even been to Australia before until I was headhunted by IAG. It represented an enormous opportunity from an insurance perspective,” Searles said. “It meant I could transfer all this knowledge and experience I had gained of the UK market into the Australian market. 

“There’s a great Australian phrase: ‘she’ll be right, mate’ – that was very much the attitude I had at the time.”

Wanted down under

The IAG role ensured Searles was noticed in the Australian insurance world. Within two years of working as CCO at IAG, the phone was ringing again, this time with an offer to be CEO of Austbroker Holdings, the leading broking network in Australia.

Austbrokers was originally founded in the 1980s by insurance giant MMI to buy up insurance brokers on an equal partnership basis using the owner-driver model, the business grew and was made independent.

When it was floated in 2005 to become the first general insurance broking network to be listed on the ASX, Austbrokers had spread into 80 locations, had 34 business partners, A$66m (£37m) in investments and A$100m in market capital.

“It was something of a stock market darling,” Searles said. “It was growing and returning double-digit profit each year. I took the role on thinking it was going to be like shooting fish in a barrel,” he added.

“The reality, however, was very different. We were the only game in town, the only broker going out and buying other brokers.”

Searles foresaw a problem. Austbrokers was reliant on acquiring new business to grow. The lack of competition in the market meant that eventually Austbrokers would run out of businesses to buy. The model needed a rethink.

“Today there are listed competitors all over the place in the form of Steadfast, Gallagher, Aon, Marsh et al. Where we were the only one originally, there are now six or seven other big brokers competing for the same business.”

There were other challenges too. When Searles first joined Austbrokers in 2013, the business had investments in 41 brokers across Australia generating 92% of profit, with the last 8% coming from 14 underwriting agencies.

The portfolio was out of balance and profits could easily be swayed by market forces outside of the board’s control, he said.

“We’ve been in one of the softest markets Australia has ever seen, three years ago premium rates were down 11%. When I first joined Austbrokers, we were hit hard by this and saw profit decline because interest rates were reducing in Australia and we were losing commission as rates dropped. A lot of our book was reliant on commission and rates,” Searles added.

Strategy change

What was needed was a fundamental remodel of the business. The remodel gave birth to AUB Group. The driving philosophy was to use an equity-based business model where the owners remain directly responsible for the day-to-day operations. At the same time, each business actively leverages the advantages of AUB’s scale, infrastructure, and partners.

Lying beneath the group umbrella are AUB’s broking networks, Austbrokers and NZ Brokers, which are represented by over 135 partner businesses across Australia and New Zealand.

AUB only employs around 40 people at the group level and each of the 135-partner business under the group has a member of the AUB team on the board.

“There’s a team of seven or eight people who sit on the boards. There isn’t a single entity that we invest in that we don’t sit on the board. It’s not about control; it’s about insight.”

Alongside the broker networks, is the group’s underwriting arm Sura, a group of underwriting agencies that underwrite, distribute and manage niche portfolios on behalf of licensed insurers, including the Lloyd’s market.

The third and final arm is AUB risk services, a group of risk services partners including risk management, rehabilitation, and claims firms.

Today the group represents over one million policies, via some 135 partner businesses that span 425 locations throughout Australia and New Zealand. Combined, the group covers over A$4.5bn (£2.5bn) in policy premium.

“All of this diversification and change has meant that we have diversified our profit generation. The board likes this. We didn’t set out to diversify for the sake of it; it was to change the nature of our strategy based upon the risks we saw,” Searles explains.

“In this era of disruption and change, our model is now one of being a trusted adviser of risk to the client. The aim is to be more than a collection of brokers. Now a client can come to a broker and have access to the full spectrum of insurance services that their business could require.

“Not everyone gets it,” Searles said. “There is now only one member of the executive team who was here five years ago. We’ve had to say goodbye to some people and let others go on the basis that they didn’t quite get it  but that’s ok.

“The key is to have an aligned team who can carry the business forward. It’s a cliché but working together is always the key to success.”

Model system

Searles says the plan is now to build an “ecosystem” in which risk management, loss adjusting, underwriting agents, claims, broking, and rehabilitation specialists are able to build commercial relationships with each other all under the group umbrella.

“It’s about turning the notion of what it means to be an insurance broker. Being an insurance broker says two things: general insurance and getting the cheapest price. In this modern world, it’s all about risk and our buyers are expecting more.

“The name of broking will change to ‘risk consultant’ or ‘trusted risk adviser’ and we’ll be in the position to meet that need with the power of the group behind us and with all of these added capabilities.”

A challenge Searles faces is how to convince the businesses under AUB to collaborate and work together.

“There’s no point having all of the resources needed for a client at every stage of the buying and claims process if the businesses offering these services are married up in some way,” he said. “We’re already seeing this collaboration happen but it has been a hard sell.

“At the end of the day, I’m a glorified marriage broker, it’s like speed dating for insurance. The commonality is that I have shareholding in all of the businesses, I’m a partner to all the businesses across the piece, I’ve done my due diligence and I only invest in very good companies and I know full well that if the businesses all talk to each other, then collectively we’re all going to do very well.

“I always say to our businesses that I’m not going to tell them what price to charge or how to run their business. All I’ll do is introduce them to each other. Historically brokers would be spending money external to the group, now they can get the same services internally. It’s quite unique but it seems to be working.”

And working it is. At the end of the last Australian financial year, AUB Group announced a 7.5% increase in adjusted net profit after tax to A$40.4m as all operating areas of the business posted growth.

Searles said these results acted as a milestone moment for the group. “In Australia the premium rate environment has been negative for four years. This means that in a flat market we still grew and it was organically.

“It’s taken five years to build and get to this stage. The next five years is about really getting this humming along. We have it in Australia now and we’ll have it working in New Zealand and then it’s a case of where next.”

UK expansion

The UK would be an ideal potential target territory for AUB Group to expand into. Searles said thanks to commonality of language, a similar regulatory and legal environment as well as easy access to talent and a similar insurance industry culture, the UK remains very much on the cards.

“There is still a lot or work to do in order to test our thesis. But one of the reasons I’m here in London is to look at other potential markets,” he said.  

“Our business model is one of owner-driver business ownership; our operating model is leveraging scale and size to get better deals for our 135 partner businesses. I wouldn’t move into a market without knowing that all three aspects of the model apply because then we’d have to start changing the fundamentals.”

Searles said he did not see the UK’s decision to exit the European Union as a direct threat to any future decision. “With our home market sorted and New Zealand firing on all burners, we’re moving into the next stage of the task at hand.”

“I get accused of being slightly glass half full a lot of the time but it’s really about seeing the art of the possible. The company had been very successful for a period of 30 years before I joined.

“What I brought to the table was the voice to question whether that success was sustainable and carry on. From there, it’s about giving people the freedom to do their jobs without micromanaging them and provide the business with a vision. That won’t change.”

Further reading

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• Topics
• Aon
• Australia
• Company results
• Marsh
• Mergers & acquisitions (M&A)
• Networks
• New Zealand
• Rehabilitation
• United Kingdom (UK)
• Claims
• Lloyd's/London
• Broker
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• AJ Gallagher