Growth Watchlist – Earnings Update Steadfast Group (SDF)

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***GENERAL ADVICE ONLY*** 

Steadfast Group (ASX: SDF) has delivered a robust 1H25 performance, reinforcing its position as the largest general insurance broker network and underwriting agency group in Australasia. The company achieved double-digit growth across key financial metrics, driven by a disciplined acquisition strategy, organic expansion, and operational efficiencies. With strong premium growth, expanding international operations, and a focus on margin improvement, Steadfast continues to capitalize on its scale and strategic positioning to drive sustainable long-term returns.

Financial Performance 

  • Underlying NPAT: $128.1M, +20.9% YoY, driven by strong operational execution and acquisitions.
  • Underlying NPATA: $154.6M, +19.0% YoY, reflecting growth in core operations and acquisitions.
  • Underlying EBITA: $262.4M, +14.6% YoY, driven by:
    • Organic growth: +9.1% (leveraging existing businesses).
    • Acquisition growth: +5.5% (new equity stakes in subsidiaries).
  • Statutory NPAT: $106.4M, up from $100.4M in 1H24.
  • Underlying Revenue: $881.3M, +11.5% YoY, fueled by higher commissions, organic business growth, and premium rate increases.
  • Underlying Diluted EPS (NPAT): 11.6c per share, +14.1% YoY, reflecting earnings growth and disciplined capital management.

Growth Breakdown

  • Core organic growth: +9.1%, driven by existing businesses, higher commissions, and cost efficiencies.
  • Acquisition growth: +5.5%, contributions from strategic acquisitions and increased equity stakes in brokers and underwriting agencies.

Business Segment 

Steadfast Australasian Broker Network

  • Gross Written Premium (GWP): $6.5B, +7.9% YoY, driven by:
    • +5.2% organic growth (premium rate increases & new policies).
    • +2.6% growth from AR network.
    • +0.1% growth from net new brokers.

Network Expansion

  • 5 new brokers joined in 1H25.
  • 409 network brokers (up from 342 at IPO).
  • 16 new equity stakes acquired in brokers.
Key Trends
  • Premium pricing stabilizing at mid-single-digit growth.
  • Increased competition in the mid-to-large commercial market, while personal lines and SME remain stable.

Steadfast Underwriting Agencies

  • GWP: $1.22B, +11.7% YoY, benefiting from pricing power, strong retention, and new business initiatives.
  • Underlying EBITA: $106.4M, +15.8% YoY, driven by:
    • +7.0% organic growth (better pricing and retention).
    • +4.7% acquisition growth (expanded capacity and market share).

Key Developments

  • Increased premium pricing power due to favorable market conditions.
  • Investment in automation and data analytics to enhance underwriting efficiency.
  • Expansion into the London market via new acquisitions.

Steadfast International Expansion

ISU Steadfast (USA)

  • Performed ahead of expectations, driven by:
    • Higher profit sharing (+15%).
    • Strong membership growth (now 235 agencies).
    • Better cost control & margin expansion.

London Market Expansion

  • Acquired H.W. Wood’s UK & Greece businesses and HWI France.
  • Strengthens wholesale broking and binder management.
  • Strategic positioning for global expansion.

Acquisition Activity

  • $198.9M in acquisitions completed YTD, including:
    • 3 new acquisitions ($70.6M).
    • 9 step-up acquisitions ($78.9M) (increased equity stakes).
    • 15 bolt-on acquisitions ($32M).
    • $53M spent on H.W. Wood acquisition.
  • FY25 target: $300M in acquisitions.

FY25 Guidance & Outlook

Revised Guidance

  • Underlying EBITA: $585M – $595M (slightly revised down from $590M – $600M).
  • Underlying NPAT: $290M – $300M (unchanged).
  • Underlying NPATA: $340M – $350M (unchanged).
  • Underlying Diluted EPS Growth (NPAT): 12% – 16% YoY.

Key Assumptions

  • Mid-single-digit insurance premium rate increases expected in 2H25.
  • $300M in acquisitions targeted for FY25.
  • No major regulatory changes impacting commissions.

Market & Regulatory Environment

  • Reinsurance market improving: December 2024 renewals were favorable, but catastrophe (CAT) losses remain uncertain.
  • Regulatory Risks:
    • Treasury Laws Amendment (M&A Reform) Act 2024 – Steadfast engaging with ACCC before full implementation in 2026.
    • Strata legislation changes in NSW – Enhanced transparency requirements not expected to materially impact business.
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