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Australia's largest insurance broker network Steadfast Group (ASX: SDF) has reached a deal to acquire a 70 per cent stake in fast-growing underwriting agency Sure Insurance for $148.8 million, and will rattle the tin to investors to pay for further acquisitions after a solid four months of trading that have lifted profit guidance.
The agreement with Sure Insurance also includes two potential earn-out payments based on performance in FY24 and FY25, as well as a put and call option to buy a further 20 per cent of the company which provides home and contents insurance in regional Queensland.
"Consistent with our growth strategy, Steadfast Group continues to pursue highly attractive acquisitions that are complementary to the existing portfolio and further enhances Steadfast Group as the largest general insurance broker network and largest group of insurance underwriting agencies in Australasia," says Steadfast Group CEO and managing director Robert Kelly.
"Sure Insurance is a highly compelling acquisition opportunity, and there is strong cultural alignment between the two organisations.
"We look forward to partnering with the Sure Insurance team to continue providing unique solutions to the market in regional Queensland and support Sure Insurance’s continued geographic growth."
Sure Insurance managing director Bradley Heath expresses delight to be working with Steadfast, an organisation he claims is aligned with the same philosophy.
"We are particularly excited by the potential opportunities Steadfast can provide to support our growth and expansion," Heath says.
The news comes within six weeks of Sydney-based Steadfast announcing the US$55 million ($84.5 million) acquisition of one of the USA's largest privately owned independent insurance agency networks, ISU Group.
Steadfast is factoring in $280 million worth of acquisitions in FY24 excluding the Sure Insurance investment, and has launched a fully underwritten placement to that amount to be raised at no less than $5.06 per share - a 6.5 per cent discount to the last trading price of $5.41.
In addition, the company will undertake a share purchase plan (SPP) targeting $30 million, although directors will have the discretion to increase this figure based on demand.
The acquisitive push follows a strong four months of trading at the start of FY24, with premium increases from insurers in excess of original guidance assumptions.
If insurers maintain premium rate increases and in the absence of any adverse impacts from the geopolitical climate, and should everything go to plan on the raise and the Sure Insurance acquisition, then Steadfast's board believes underlying earnings should be in the range of $520-530 million, versus previous expectations of $500-510 million.
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