Thinking bigger

After splitting with Steadfast and setting up its own local trading system, PSC stays focused on its global ambitions

By Bernice Han

Few doubt the ambition of PSC Insurance Group, the Australian-based multinational insurance broker that started in 2006 as a small inner-city business and grew to become one of Australia’s leading brokerages.

In recent years PSC has continued to diversify its broking revenue base, adding underwriting agencies to complement its thriving core operations.

Substantial acquisitions have also been made in the ultra-competitive UK market to build up a considerable presence in the world’s sixth-largest economy.

One of its most significant moves – buying Lloyd’s broker Paragon International for £42 million in 2019 – gave the business entry into the US market. About 60% of Paragon’s revenues come from the US wholesale broker market.

The Paragon investment was made shortly after Tony Robinson, then a non-executive director, was appointed Managing Director. He said at the time the Paragon deal fulfilled a key strategic goal of PSC: to have a presence in the US, the world’s largest insurance market.

And the drive to grow the PSC empire is gathering pace. More assets have since been acquired, not only in Australia and the UK, but also in the Asian financial hub of Hong Kong. The business has also expanded its operations in New Zealand.

“We want to be a globally significant broker,” Mr Robinson said in an earnings call in August, on the day the broker released its full-year financial results.

The upsides of the business are there to see. PSC turned in another solid performance in the last financial year, delivering a 19% rise in underlying pre-tax earnings to $111 million, with underlying net profit after tax surging 23% to $78.4 million.

Mr Robinson also confirmed that PSC was among the parties vying to acquire Honan Insurance, the Melbourne-based broker that is 80% owned by private equity firm TA Associates. US-based broking giant Marsh reportedly paid a knockout bid of $700 million for Honan.

“It’s been an interesting year for us,” Mr Robinson told the earnings call. “We had a go at a couple of big steps. One was Tysers and the second was Honan. Unfortunately, neither of those came off.”

The planned Tysers UK 50/50 retail joint venture with AUB Group was dropped in May, putting an end to months of discussions to get the partnership moving.

However, one of those big steps by PSC did come off: the launch of its own trading platform. This came after the broker left the Steadfast network at the end of May – a move that took the industry by surprise when it was made public.

The Steadfast Client Trading Platform is seen by the network as a major asset for its members. But whatever the reasons behind the split with Steadfast, PSC is confident it has a winner in Apex.

The company was sensitive about discussing the system in any detail when it was first launched, but its introduction in June has vindicated Mr Robinson’s enthusiasm about the new bot-enabled trading system.

The goal, he says, is to “stand independently of anyone else, so that we’re dealing directly with Australian underwriters”.

Developed and built internally with help from an insurtech, the move to a standalone system is a significant move for PSC. It provides access to insurer platforms via Sunrise Exchange or direct to obtain multiple quotes with the help of bots.

PSC’s Chief Executive for Australia, New Zealand and Hong Kong, David Hosking, tells Insurance News the Apex system is “essentially robots doing what a human can do, but at record speed”.

“The system sources a number of quotes by using robotics and presents these quotes to the broker.”

PSC sees the decision to introduce its own multi-quote system as a logical move for a business that aims to be a significant broker in international markets, despite the many doubters out there who still question the rationale to leave the Steadfast platform.

He says the partnership has served the two organisations well, but it had come to a point where their respective needs diverged. “Like any partnership, a time comes where you have to consider what’s next.”

He says it was becoming apparent that PSC needed to set its own business agenda, and needed autonomy to negotiate with insurance partners that would best support its broking business and authorised representatives (ARs).

“There’s a direction that Steadfast will have that may be good for them, but they’re just not exactly what we need,” Mr Hosking says. “We were finding more and more that there were areas and investments that we would want to [be involved in] that was more for our people, our ARs and their clients.”

The timing was right too for Apex, Mr Hosking says. PSC is at a stage where it has the scale and resources to do it all on its own.

“We now do well over $1 billion dollars in premium in the Australian market. We continually invest for the benefit of our brokers, ARs and their clients. And Apex is a logical extension of this – we want to invest in our own platform.”

“We now do well over $1 billion dollars in premium in the Australian market. We continually invest for the benefit of our brokers, ARs and their clients. And Apex is a logical extension of this – we want to invest in our own platform.”

The idea that PSC should have its own trading system came up around August last year during internal discussions about the company’s medium-term IT roadmap.

“One of the things we spoke about but we hadn’t prioritised was a trading platform,” Mr Hosking says.

The project took on more urgency after it was mutually agreed late last year that the Steadfast-PSC partnership would end in May this year.

While it may be early days for Apex, PSC says the trading platform is already starting to pay off. Its brokers receive multiple quotes with minimal input, which can be clicked through, amended and ultimately bound.

At any given time there are more than 700 users accessing the system with around 7000 multiple quotes being generated in the Apex server each week.

Apex also interfaces with PSC’s core broking system, removing data duplication errors. Mr Hosking says this creates significant operational efficiencies.

The company has also negotiated agreed product wordings and enhancements with its major insurer partners.

“About 30% of our business is from classes of business that require an efficient way to get multiple quotes, so it’s a very important part of our business,” Mr Hosking says.

At present it deals with five classes – private motor, home, landlords, commercial motor and business pack – from different insurers. More product classes will be added in the near future.

“We are collecting so much more data on not just our clients and our clients’ risks but our insurers and who we are trading with. It’s phenomenal,” Mr Hosking says.

“Apex is our ongoing journey to the summit of continually helping our brokers by giving them a better client outcome and a much more efficient process. The insurers have been very supportive as they are all on Sunrise and we are still accessing Sunrise.”

As with any projects, especially ones to do with technology, there were “bugs” that needed to be resolved but he says it’s part of the learning curve, reflecting PSC’s commitment to keep investing in the system.

“We’ve cleared the bugs. The journey so far has opened our eyes on what can be achieved – including partnering with insurtech experts to deliver various parts of the chain at a fraction of the cost and time of building our own technology in-house. It’s a really exciting time to be part of PSC and I really want to acknowledge the great support of our ARs and staff on this journey.”

Mr Hosking, who left Allianz to join PSC in 2021, says the broker has come a long way since it started 17 years ago.

It had revenue of just under $1 million and one office, in Melbourne, in 2006 when Paul Dwyer – set to become the non-executive Chairman – founded the business.

The company’s distribution division – which comprises insurance broking including PSC Network Partners, life broking and workers’ compensation consulting – recorded $1.15 billion in gross written premium in the last financial year.

The Australian broking business grew 23% and about half of that growth was from existing operations. That’s comforting for Mr Hosking, who is still regretful that PSC was gazumped by Marsh in the Honan acquisition.

“It’s a huge business, it’s about 40% the size of PSC. Acquisitions the size of Honan rarely come along.”

The price allegedly paid for Honan by Marsh surprised many market insiders, and Mr Robinson’s comments in the company’s 2023 annual report emphasise the company’s discipline in approaching M&A opportunities.

“At the moment some assets we see have achieved prices that we can’t justify,” Mr Robinson says in the report. “We are prepared to pay sensible market prices for opportunities. We believe that this disciplined approach is a key to the continued contribution that our acquisition strategy makes to earnings per share growth.”

Mr Hosking says PSC continues to be on the lookout for “brokers out there who have built some fantastic businesses and are thinking about what to do next”.

The company says Mr Dwyer will use his international network of business contacts “to find other acquisitions and seeding opportunities” when he becomes Non-Executive Chairman after PSC’s annual general meeting in November. He replaces industry veteran Brian Austin, who becomes Non-Executive Deputy Chairman, Mr Dwyer’s previous role.