Steadfast Group says premium rates will continue to rise this financial year as insurers put through increases to address inflationary pressures that are particularly affecting property underwriting. 

The company today reported that statutory net profit rose 21% to $228 million last year, boosted by acquisitions and existing businesses. Underlying earnings before interest, tax and amortisation (EBITA) increased 22.7% to $528.5 billion, falling within the guidance range.  

Australasian broking networks gross written premium gained 12.1% to $13 billion, with organic growth supported by price rises and volume increases of about 3%. Underlying EBITA grew 19.6% from equity brokers. 

CEO Robert Kelly says mid-year renewals were strong and insurers meeting with the group have pointed to the need for further rate increases to return to technical levels. 

“The discipline we’ve seen over the past few years is remaining and it’s loss ratio-driven,” he said.

“We still see that there will be accretive increases in premiums between 7 and 9 per cent over the next 12 months.” 

The company says labour and materials cost pressures and natural catastrophe issues remain challenging for the industry, and inflationary impacts have been highlighted at meetings with insurer executives. 

“They were very clear that there’s still a lot of compound inflation in the system relative to the headline inflation number that we all see,” COO Nigel Fitzgerald said.  

Steadfast underwriting agencies generated GWP of $2.3 billion, up 13.4% on the previous year, with underlying EBITA growth of 18.9%.  

GWP transacted on the Steadfast Client Trading Platform rose 20% to $1.4 billion. 

Mr Kelly highlighted potential regulatory impacts on insurers and associated underwriting agencies from the introduction next July of prudential standard CPS230, which requires action to manage operational risks. Steadfast has already made changes in its agencies business ahead of the standard, but he says it could affect smaller agencies elsewhere as insurers reassess.

Mr Kelly has welcomed a bill before the NSW parliament that will introduce strata insurance reforms. About two years ago, Steadfast commissioned consultant John Trowbridge to carry out an independent review on the strata sector, with findings highlighting remuneration transparency issues. 

“We’re very supportive of that bill, and we’re very excited that the government’s seen to act in NSW in that way,” he said. 

Steadfast completed 48 “earnings-accretive investments” last financial year for a total of $457.8 million, including ISU Group in the US and underwriting agency Sure Insurance.   

ISU, which has 228 members across 40 US states, exceeded the profit that was expected at the time of purchase. The business has been renamed ISU Steadfast. 

Steadfast is targeting $300 million of acquisitions this year and continues to see opportunities from its trapped capital program in Australia.  

Group underlying net profit is expected to rise to $290-$300 million and EBITA is expected to reach $590-$600 million.

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