Steadfast faces revenue headwinds in the next two financial years, putting pressure on the company to accelerate mergers and acquisitions in the US, Macquarie Equity Research says.

A Macquarie report notes Steadfast strata specialist underwriting agency CHU’s 10-year distribution arrangement with QBE ends next March, and the commission revenue rate could be lowered.

“Compounding this, there are a couple of competitors looking to encroach on CHU’s stranglehold of the market, which means [its] gross written premium growth outlook could slow in coming years,” the report adds.

Macquarie says new insurers are joining the Steadfast Client Trading Platform at a slower pace and GWP growth on the platform could be expected to slow given a turn in the pricing cycle.

“As we cycle multiple years of repricing, plus affordability and regulatory headwinds for insurers, it is difficult to see the commercial insurance premium rate cycle holding at these levels for an extended period.”

Insurance brokers already at scale may need to ramp up mergers and acquisitions or take out costs to support earnings-per-share growth, Macquarie says.

It says the pipeline for Steadfast trapped capital acquisitions, where equity is acquired in broking businesses looking to sell down, seems to be slowing in Australia and multiples are increasing as more competition enters the market from offshore.

Steadfast acquired the ISU network in the US last year and has flagged benefits from the rollout of its technology in the American market, and equity acquisitions along the lines of its trapped capital program.

Macquarie says it will probably be years before a rollout of the Insight broker platform and the Steadfast Client Trading Platform in that market lift revenue, putting pressure on short-term mergers and acquisitions to generate earnings upside, or raising the possibility of buying US technology to accelerate the program.