Steadfast is acquiring two underwriting agencies and one insurance broker from QBE for $290 million, as well as buying a major brokerage.

Reporting the move on the Australian Securities Exchange this morning, Steadfast announced it has also agreed to buy the Australian and New Zealand business of IC Frith, excluding its warranty business, the WA operation and New Zealand-based insurer.

The QBE companies are Underwriting Agencies of Australia (UAA), Corporate Home Underwriting (CHU) and Body Corporate Brokers. QBE will remain the underwriter of both agencies.

MD and CEO Robert Kelly says the acquisition of the QBE underwriting agencies, alongside the acquisition of Calliden’s underwriting agencies, “has created the largest group of underwriting agencies in Australasia and brings tremendous scale and depth to Steadfast Underwriting Agencies”.

“On a pro-forma basis, underwriting agencies will make a similar contribution to EBITA (pre-corporate office expenses) as insurance broking,” he said. “The pro-forma annual GWP from the group will be approximately $765 million.”

The acquisitions will be financed through an institutional capital-raising of around $300 million.

Steadfast says the annual gross written premium (GWP) of the newly acquired companies is $575 million, and will contribute earnings before interest, tax and amortisation (EBITA) of $40 million.

“As the largest broker distributor of UAA and CHU products, Steadfast is the natural acquirer of these businesses.

“Furthermore, we are also the natural acquirer of IC Frith, which was a founding member of the Steadfast network in 1996. These acquisitions met our strict acquisition criteria in terms of fit, culture and earnings per share (EPS) accretion for our shareholders.”

Mr Kelly says integration risk for the assets is minimal, “particularly with respect to the QBE agencies who we have been working with for close to 20 years and which are stand-alone businesses”.

To fund the acquisitions Steadfast will conduct a placement to institutional investors to raise about $89 million, and an accelerated non-renounceable entitlement offer to raise a further $211 million at $1.26 per share.

The company says the estimated cash EPS accretion on a full-year basis from the acquisitions and equity-raising is around 10%.

First-half results

Steadfast also announced its first-half results, showing a 49.3% rise in fees and commissions over the corresponding period last year.

GWP in the period rose 6.1% compared with the first half of last financial year.

EBITA after corporate office expenses rose 16.6% on the previous corresponding period, and adjusted cash EPS rose 11.5%.

Steadfast says strong revenue and profit growth in the first half was driven by acquisitions made after the August 2013 float – excluding the Calliden acquisition, which was completed on December 23 last year.

The acquisitions include four underwriting agencies, four insurance brokers – including two Steadfast network brokers and a reinsurance broker – and the second-largest broker network in New Zealand, Allied Insurance Group, which has since been rebranded to Steadfast New Zealand.

Steadfast says a guidance range for FY15 cash EPS growth for the full financial year has been revised upwards to 22-25% to include Calliden and the latest acquisitions. The previous estimate was in the range of 10-13%.

More in our regular bulletin this afternoon.