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What does Steadfast’s IPO mean for QBE?

The upcoming initial public offering (IPO) of insurance broker Steadfast is sure to be getting some investors excited. Handling around $3.7 billion of insurance premiums each year, Steadfast is a significant force within the industry and a major competitor to listed peer Austbrokers (ASX: AUB).

For QBE Insurance (ASX: QBE), it is difficult to determine whether the listing of Steadfast with have a positive, negative or no bearing on the insurer.

On the one hand, Mr Frank O’Halloran, who was previously the CEO at QBE, has accepted the position of Chairman at Steadfast. Given that Steadfast reportedly writes a significant amount of business for QBE and hence receives significant commission dollars from QBE, negotiations of future commission rates may become more heated now that O’Halloran, with his intimate understanding of QBE, works ‘for the other side’.

On the other hand, Steadfast’s listing will mean its earnings and, importantly, its profit margins will be under more intense public scrutiny. This may allow QBE to push back and drive a harder bargain in commission rate negotiations.

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Motley Fool contributor Tim McArthur owns shares in QBE Insurance.

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