Shares in Australia's biggest insurance broker Steadfast Group Ltd (ASX: SDF) are in a trading halt after the company reported full year earnings for 2019 and announced a $100 million capital raising.
How did Steadfast perform?
The highlight from Steadfast's FY19 report was a 16% increase in gross written premiums (GWP) of $6.1 billion, which the company says is a record. Underlying revenue for the full year was also up 21% to $688 million and earnings before interest, tax and amortisation increased 17.8% to $193 million. Other highlights from the report included:
- Underlying net profit after tax (NPAT) up 19% to $89.2 million
- Statutory NPAT up 37% to $103.8 million
- Final dividend of 5.3 cents per share
In conjunction with its full-year result, Steadfast also announced a $100 million capital raising.
What has driven growth?
Steadfast's organic growth has been driven by equity brokers and continued strong performance from underwriting agencies. Acquisition growth was also strong for FY19 due to broker and agency acquisitions and the purchase of IQumulate Premium Funding. Record GWP growth was achieved by price and volume increases and from new brokers joining the network. Steadfast added 21 brokers to its network, with a total of 398 operators in Australia, New Zealand and Singapore.
According to Steadfast's CEO and managing director Robert Kelly, the company's strong set of results was "driven by organic acquisition growth of our equity brokerages and underwriting agencies."
Mr Kelly added:
Management remain focussed on delivering further value for shareholders by continuing to convert acquisitions that meet our strict criteria, growing GWP volumes through our proprietary SCTP insurance technology platform, and continuing to provide our network of brokers market leading general insurance solutions to deliver positive client outcomes.
Capital raising
Three brokers are expected to act as joint lead managers and underwriters for Steadfast's $100 million placement. With a floor price of $3.28 per share, equity desks at JP Morgan, Macquarie Capital and UBS are managing a bookbuild to help Steadfast raise $100 million via the placement of new shares. The new shares will have equal status to existing shares, however they will not be eligible for Steadfast's final 5.3 cent dividend.
Funds raised from the capital raising will be used for future acquisitions, committed expenditure and general corporate purposes. A non-underwritten security purchase plan to existing investors is expected to follow the placement.
Steadfast's outlook
Steadfast is currently in talks to acquire Insurance Brokers Network Australia Limited (IBNA) and is in the early phases of a Bid Implementation Agreement in a proposed buyout of its existing brokers. If successful, the proposed takeover of IBNA could add up to 79 brokerages and $1.25 billion of GWP.
Shares in Steadfast will remain in a trading halt until the commencement of trading on Friday 23 August, or when an announcement is released to the market.
