Steadfast has surprised the local market with today’s $300 million-plus swoop on QBE’s underwriting agencies, a related brokerage and most of the substantial assets of founding member IC Frith. 

As insuranceNEWS.com.au reported in a Breaking News bulletin this morning, Steadfast has agreed to buy QBE-owned Underwriting Agencies of Australia (UAA), Corporate Home Underwriting (CHU) and its associated brokerage Body Corporate Brokers for $290 million. 

The IC Frith purchase excludes the broker’s WA branch and its Australian and New Zealand warranty businesses.

The QBE agencies have been on the market since August, with major competitors to Steadfast declaring the assets too expensive and QBE reportedly unwilling to sell them separately.

“Steadfast was the only one prepared to buy them in a bunch,” one source told insuranceNEWS.com.au today.

QBE has sealed a 10-year exclusive underwriting agreement with Steadfast for both agencies.

Steadfast also announced its first-half results, showing a 49.3% rise in fees and commissions compared with the previous corresponding period.

Gross written premium (GWP) in the period grew 6.1%.

Earnings before interest, tax and amortisation (EBITA) after corporate office expenses gained 16.6% and adjusted cash earnings per share rose 11.5%. 

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

Steadfast MD and CEO Robert Kelly told a media briefing this morning the increasingly soft market can provide opportunities to grow the business.

 “We have a defensive customer base and we are hardly exposed to the big end of town,” he said.

“The corporate end has significant pricing pressure. At the top end of town they are offering to do business for 12 months with no fee or commission.” 

UAA launched in Newcastle in 1972 and became a wholly owned subsidiary of QBE in 2008, while CHU was founded in 1978 and has been fully part of QBE since 2004.

Body Corporate Brokers is a strata specialist established on the Gold Coast in 1996. It has branches in Queensland, NSW, Victoria and WA. 

IC Frith has been a member of Steadfast since the group’s formation in 1996.

Mr Kelly says the acquisition of the QBE underwriting agencies – alongside the December purchase 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 about $765 million.”

Steadfast says annual GWP of the newly acquired companies is $575 million, and will contribute EBITA of $40 million.

Mr Kelly says Steadfast is also looking to Asia for further expansion. Eight Asian brokers are coming to the Steadfast conference in Adelaide in April.

“We are looking at the Singapore market, which is well established, highly regulated and where we have links. It takes a long time to do deals and we spend laborious hours doing due diligence. We are happy to go to the edge of the cliff and walk away.”

He says there is “probably an opportunity to mop up some competitors in some areas” and Steadfast has a team of people looking at acquisitions.

“The benefits of scale we have now give opportunities to bolt on something in these agencies, [which] is quite good for our bottom line.”