Steadfast Group has upped its earnings guidance as the business made a “tremendous start” to the new financial year, underpinned by hardening rates and volume growth.

Underlying earnings before interest, tax and amortisation (EBITA) for the year to June 30 is now projected at $245-255 million, up from $235-245 million previously, Steadfast announced at today’s annual general meeting.

Net profit after tax, also on an underlying basis, has been raised to $120-127 million from $115-122 million.

The previous earnings targets were unveiled in August when Steadfast released its results for the last financial year, with underlying EBITA coming in at $223.5 million and underlying net profit after tax at $108.7 million.

CEO and MD Robert Kelly told shareholders the business has continued to perform strongly in the first quarter, with EBITA 20.7% ahead of the same period last year.

He says the “excellent quarter” puts the business in a position to perform better than previously expected.

“This is a tremendous start to [the 2020/21 financial year],” Mr Kelly said. “Insurers have continued to increase premium rates and volumes have held firm.”

He says Steadfast Underwriting Agencies, which increased its gross written premium by 13.1% to $1.33 billion in the last financial year, continues to outperform with strong organic growth.

While there remains “considerable uncertainty prevailing in the global economy” because of the pandemic disruption, Mr Kelly says “the trading conditions experienced in the last six months provide confidence as to the resilience of our insurance broking and underwriting agency business”.

He says Steadfast continues to have a strong pipeline of acquisition opportunities, having invested $110 million since June 30 in accretive acquisitions on an earnings per share basis.

This month Steadfast made its latest acquisition, paying a confidential sum for Gold Seal Practice Management and Gold Seal Intellectual Property.

Mr Kelly says the purchase reflects Steadfast’s commitment to service its broker network and support their audit, compliance and customer experience.

Morningstar analyst Nathan Zaia told insuranceNEWS.com.au the revised guidance “reinforces both the resiliency in earnings and the competitive strengths” of the Steadfast business model.

“Unlike insurers which face risks around natural hazard events and claims - both frequency and costs - the insurance broking business carries no such risk,” Mr Zaia said.

“Insurers are also being hurt by lower returns on investment portfolios and higher reinsurance costs. In fact, the headwinds for the insurers are leading to premium increases, premiums which the commission paid to a Steadfast broker are based on.”

Mr Zaia says following the revision from Steadfast, he has increased his underlying net profit after-tax forecast for the business by 2.5% to $125 million on account of a “slightly more optimistic outlook for premium increases”.