Steadfast buys QBE agencies/broker

Steadfast buys QBE agencies/broker

Australia-based broker and underwriting agency network Steadfast has launched a 1 for 3 rights issue and a fully underwritten institutional placement to raise about AUD300m. The institutional placement will raise about AUD89m through the placement of 70.3m new shares. The "Retail Entitlement Offer" will raise the rest.

The cash raising will partly fund the acquisition of Australia Pty, CHU Underwriting Agencies and Corporate Underwriting Agencies Ltd from locally based insurer QBE (for AUD290m)

It will also partly fund the acquisition of the Australian and New Zealand Broking business of locally based financial services provider IC Frith (excluding its warranty business and a New Zealand-based insurer).

Following the completion of the offer, Steadfast will have issued about 238m new shares, bringing the total in circulation to about 741m. The AUD1.26 price compares with a market price of AUD1.49 at close on Monday, within a 52-week range of AUD1.25 to AUD1.75.

Meanwhile, Steadfast has reported a 6.1% year on year increase in gross written premiums placed by Steadfast Network brokers for the first half of its financial year, to December 31 2014. Fees and commissions were up 49.3% year on year. The guidance for full-year 2014/2015 earnings per share growth has been revised upwards to a range of between 22% and 25%, compared with a previous estimate of between 10% and 13%. Much of the increase is a result of the acquisition of Calliden and of the businesses from QBE/ IC Frith.

Steadfast's acquisitions apart from Calliden in the past year comprise four underwriting agencies, four insurance brokers (including a reinsurance broker) and Allied Insurance Group in New Zealand, the second-largest broker network in the country.

The 6.1% year on year increase in placed GWP by Steadfast Brokers in the first half, to AUD2.1bn, represented organic growth of 1.5% and acquisition growth of 4.6%.  Of the organic growth, there was an 8.6% rise in volume, but this was reduced because of a 7.1% decline in price.

Steadfast Share Price

Steadfast Underwriting Agencies saw a 76% rise in GWP placed on pro-forma H1 2014, to AUD101.4m. This was primarily die to acquisitions. The Calliden deal (comprising eight agencies) was only closed on December 23 and so did not impact the figures. The Calliden purchase is expected to add about AUD130m to GWP on a full-year basis.

Steadfast Managing Director and Chief Executive Robert Kelly said that "acquiring the QBE agencies along with Calliden's agencies has created the largest group of underwriting agencies in Australia and brings tremendous scale and depth to Steadfast Underwriting Agencies".

Steadfast's chairman is Frank O'Halloran, who led QBE throughout its expansionist phase in the 2000s.

The Steadfast Board declared an interim dividend of 2¢ a share, in line with the company's target dividend payout range of 65% to 85% of net profit after tax.

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