The brokers’ brew

While the speed of rate increases is slowing, the three listed brokers are already on the way to another set of strong results

By Bernice Han

Australia’s three listed broking groups – Steadfast, AUB and PSC – show no signs of slowing down at the halfway point of the 2023-24 financial year, even as rate increases slow.

“All three brokers delivered robust first-half earnings,” MST Emerging Senior Research Analyst Scott Hudson tells Insurance News. “Momentum across all three businesses is strong with organic growth rates robust.”

At Steadfast, underlying net profit after tax rose 17.5% to $106 million, juiced by price and volume growth in broking and underwriting agencies. The company’s broking network gross written premium (GWP) grew 14.3% to $6.3 billion while underwriting agencies GWP increased 8.5% to $1.1 billion.

Steadfast says it remains on track to meet the upgraded full-year guidance provided last November after it acquired northern Queensland specialist Sure Insurance. It has a forecast of earnings before interest, tax and amortisation of $520-$530 million and net profit after tax of $240-$250 million.

Chief Executive Robert Kelly says much of the increase in GWP came from price increases, with growth also accelerated by volume gains. On network acquisition opportunities, the company is “nowhere near the end” of the runway.

He says the market remains strong and rates could further rise by about 7.5% next calendar year, supported by such factors as inflationary effects, attritional claims and continuing strength in reinsurance.

AUB raised its full-year guidance after underlying net profit after tax rose to $70.2 million from $46.7 million a year earlier. Its revised forecast is for underlying net profit after tax of $161-$171 million, compared with a previous $154-$164 million range.

PSC, which has reported being in discussions with potential buyers, made an underlying net profit after tax before amortisation (NPATA) of $37.1 million. The 6% earnings rise was good enough to lift the Melbourne-based broker’s confidence. Its full-year guidance was raised to $83-$87 million from $82-$86 million.

Mr Hudson says cost pressures remain a headwind, but points out the three broking groups are experiencing solid rate and volume growth and have, for the most part, been able to hold or expand margins.

“Given the relatively positive outlook for premium rates and all three brokers’ continued investment in non-organic growth, we are confident that they will deliver results towards the upper end of their guidance ranges,” Mr Hudson says.

“The pace of premium growth may moderate but given the inflationary environment that we are currently enduring, we would still expect to see growth in premiums and sums insured. These tailwinds will continue to support a solid organic growth outlook.”

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